Transatlantic Trade Update text overlaid on top of images of US, UK and EU flagsCOVID-19 cases continue to increase on both sides of the Atlantic.  While European countries continue to impose restrictions toward stemming the spread of the coronavirus, the United States (US) remains focused on the presidential election and continued ballot counting in some states.  Despite some legal challenges, Saturday saw the announcement of Democratic presidential contender Joe Biden as the President-Elect in America.

Amid ongoing European Union (EU) and United Kingdom (UK) trade talks, the European Commission sent an opinion this past week inquiring of the UK’s refusal to abolish investment protection treaties.  Trade negotiations between the US and UK are reportedly advancing, regardless of who wins the White House.  Meanwhile, a terrorist attack in Austria, coming after two attacks in France, has furthered tensions with Muslims across the European region.

US Elections | Ballot Counting Continues for the Presidency

Tuesday, 3 November, saw a historic voter turnout in the United States and a protracted ballot counting process that continues in some states, such as Georgia and Arizona.  US President Donald Trump has not conceded and his campaign has filed legal challenges in several battleground states, especially as counts reflected on Saturday that former Vice President Biden had secured the Electoral College vote.  The final certification of the election is weeks out; is complicated by the legal challenges.  The next President’s term starts on 20 January 2021.

A key takeaway from the 2020 elections, thus far, is the polls continue to be wrong in predicting election outcomes, as President-Elect Biden was predicted to clearly win in several states that saw narrow margins voting in his favor.  Americans sent a signal that while they supported some of President Donald Trump’s policies, they rejected his approach to the pandemic.  US voters furthermore indicated they did not support some of the more progressive or socialistic components of the Democratic Party, such as the Green New Deal.

Should Biden be certified as the Electoral College winner in December (as expected), he will enter the White House in January with a Congress that may be divided in 2021.  Majority control in the US Senate remains to be decided by run-off races for the two Senate seats in the state of Georgia on 5 January.  Meanwhile, Republicans were successful in gaining additional seats in the US House of Representatives, narrowing the Democratic majority in the lower chamber.  In other words, Democrats, including President-Elect Biden, will likely have to moderate their agenda during the first session of the 117th Congress in order to secure some Republican support (especially in the Senate if that chamber remains in Republican control).  With a low rating among Americans in general (19% in October), and if the next Congress wants to advance legislation, it will require bipartisan support to advance legislation in the Senate, especially if Congress wants to appear productive and not be characterized as a gridlocked or “do nothing Congress” for the next two years, before the mid-term elections.  The 117th Congress will convene in January.

Meanwhile, the 116th Congress will soon return to Washington, commencing what is known as the “Lame Duck” session, which will extend until both chambers adjourn at the end of the year.  Lawmakers will have to address some must-pass items during the Lame Duck session, such as a compromise Fiscal Year 2021 National Defense Authorization Act, funding the US Federal Government beyond 11 December and some expiring trade measures, such as the Generalized System of Preferences (GSP) program and a Miscellaneous Tariff Bill (MTB).  The Lame Duck session typically tends to be full of surprises, with some legislative measures advancing that may not have advanced as standalone bills.  It remains to seen whether the Trump Administration will continue negotiations with Speaker of the House Nancy Pelosi (D-California) on another COVID-19 relief package that reportedly had progress before being paused ahead of Election Day, or if this will await a new Congress in January.

COVID-19 Updates | EU, UK and US

More European countries announced restrictions this past week, in an attempt to limit the spread of the virus.  Portugal and Austria imposed a partial lockdown in most of their territories, Italy added four regions on lockdown, including Lombardy, while Greece imposed a national lockdown from 7 November.  As European countries enter a second phase of lockdown, social unrest has increased throughout Europe, with protests in Rome, Milan and Naples, Madrid, Barcelona, Brussels and Berlin.

The European Medicines Agency’s (EMA) Pharmacovigilance Risk Assessment Committee announced on 20 October that it has reviewed guidance on how to prepare risk management plans for COVID-19 vaccines.  The guidance is expected to supplement the existing guidance on risk management plans for medicines and is now being consulted by the EMA’s Human Medicines Committee for adoption.

Although there was positive developments for the EU economy in the summer with the COVID-19 pandemic under control, the European Commission predicted a grim growth forecast for 2021.  In its Autumn 2020 economic forecast, the European Commission predicted a growth of 4.2% in 2021 and expected the EU’s economy to shrink by 7.8%.  Unemployment rates are expected to increase at 9.4%.  According to the Commissioner for Economy, Paolo Gentiloni,

Growth will return in 2021 but it will be two years until the European economy comes close to regaining its pre-pandemic level.  In the current context of very high uncertainty, national economic and fiscal policies must remain supportive, while NextGenerationEU must be finalised this year and effectively rolled out in the first half of 2021.”

Negotiations of the Recovery and Resolution Regulation, the main instrument that would facilitate the payment of the loans and grants to Member States in the context of COVID-19 recovery, are expected to progress next week, as the European Parliament is expected to adopt its negotiating mandate to proceed to inter-institutional negotiations with the Council and the European Commission.

On Thursday, 5 November, UK Prime Minister Boris Johnson provided an update on efforts “to put the coronavirus back in its box.”  Recognizing travel implications with the upcoming Christmas holiday, he stated,

The UK Government and the devolved administrations are working together on a joint approach to the Christmas period, because all of us want to ensure families can come together wherever they live.”

Of tight, four week restrictions imposed across England, he reminded they will expire on 2 December and a tiered approach would be reinstated.  Meanwhile, Wales ended a two week “firebreak” lockdown and reverted to a lesser set of restrictions.

The United States hit a new high of daily reported COVID-19 infections (121,054) this past week.  On Thursday, the Centers for Disease Control and Prevention (“CDC”) released a forecast suggesting the United States could reach 266,000 COVID-related deaths by the end of November.  State and local governments have control over imposing restrictions across the country, with some jurisdictions announcing stay-at-home orders and other seeking more strict lockdowns, which will likely frustrate some Thanksgiving Holiday plans later this month.

Meanwhile, on Thursday, 5 November, the United Nations voted 150-0 to hold a COVID-19 Pandemic Summit on 3-4 December.  The United States, Israel and Armenia abstained voting on a resolution – led by Canada and Azerbaijan – that authorized the Summit and spelled out arrangements, such as prerecorded speeches by world leaders and a discussion led by World Health Organization Chief Tedros Adhanom Ghebreyesus.  The US abstention explanation is available here.

On Monday, 9 November, Pfizer and German-based BioNTech released interim data from the advanced, large-scale clinical trials of its COVID-19 vaccine (BNT162b2), noting it is more than 90% effective.  Next steps, full trial data will be released and peer-reviewed or published in a medical journal.  The companies can also seek US Food & Drug Administration authorization this month for emergency use of the vaccine; a regulatory decision could be forthcoming as soon as December.  Pfizer/BioNTech estimate they can produce up to 50 million doses this year, which could protect 25 million people.  In 2021, they anticipate producing up to 1.3 billion doses.  President Trump responded to the news on Twitter, noting,


UK-EU Relations

While limited information has been made available since intensified talks resumed between the EU and UK, recent statements suggest that some progress was achieved despite wide gaps remaining on some core issues, in particular competition and state aids, and access to fisheries.  EU Chief Negotiator Michel Barnier briefed EU Ambassadors and the European Parliament on 4 November on the progress of the discussions.  In a Twitter statement, he outlined, Despite EU efforts to find solutions, very serious divergences remain in Level Playing Field, Governance & Fisheries’ which areessential conditions for any economic partnership.”  Prime Minister Johnson and Commission President von der Leyen reviewed progress on 7 November and agreed that negotiations should be intensified.  The negotiations resumed in London on 9 November.

The drawn-out trade negotiations have not been well received in Brussels, with many EU officials and diplomats expressing frustration about the process.  European Parliament International Trade Committee Chair Bernd Lange (EPP, Germany) stated,

I am on the verge of losing my patience and rejecting the project, because it really can no longer comply with democratic principles. In fact, we can no longer even keep to our time frame for a serious assessment of this trade agreement.”

Ireland’s Foreign Affairs Minister Simon Coveney also expressed,

A deal remains doable but very difficult.”

Ireland Deputy Prime Minister Leo Varadkar, on the other hand, expressed optimism about the potential of reaching a deal, suggesting that Biden’s close relationship with Ireland and his possible election victory may help break the EU-UK stalemate.  Both Prime Minister Boris Johnson and Foreign Secretary Dominic Raab commented over the weekend that a deal was “there to be done”.

Separately, on 30 October, the European Commission sent a reasoned opinion to the United Kingdom regarding the UK’s refusal to abolish investment protection treaties.  By way of background, under bilateral investment treaties companies may sue governments before private tribunals over alleged unfair treatment.  However, a 2018 judgment by the Court of Justice of the European Union (CJEU) ruled that these proceedings are illegal under EU law.  As such, the European Commission has since argued that investors should stop using private arbitration for investments within the EU.  Most EU countries agreed to abolish bilateral investment treaties in 2019, but the UK has thus far failed to take action to that effect.  Unless the UK responds to the reasoned opinion within the next two months, the European Commission could refer the UK to the CJEU before the end of the transition period.

EU-US Relations 

The EU decided on 9 November to impose tariffs on US exports worth $4 billion, following the World Trade Organization’s (WTO) decision concerning the ongoing large civil aircraft dispute involving Airbus and Boeing.  The European Commission Implementing Regulation (EU) 2020/1646  published in the Official Journal of the EU on 9 November, outlines a 15% duty on aircraft products listed in Annex I and 25% duty on a number of products listed in Annex II, varying from chocolate and other food preparations containing cocoa to unstemmed or unstripped tobacco products.  The tariffs go into effect on Tuesday, 10 November 2020.  Executive Vice President Valdis Dombrovskis confirmed at a press release the EU’s intention to “exercise our rights and impose countermeasures awarded to us by the WTO in respect of Boeing”, after the US imposed tariffs on EU goods for over a year, following a WTO decision.  The EU continues to call on both sides to remove tariffs, saying this “would represent a strong win-win” and present an “opportunity to reboot our transatlantic cooperation”.  German Federal Minister of Economic Affairs Peter Altmaier clarified that the EU27 “remains open for a negotiating settlement” with the United States.  The Office of the US Trade Representative had yet to respond to this new development.

On 3 November, US Secretary of Commerce Wilbur Ross warned the Schrems II ruling, which invalidated the EU and US Privacy Shield agreement on data transfers, could undermine the trade relations between EU and United States.  Secretary Ross expressed concern for the operators of the transatlantic US$7.1 billion market, as tech giants, such as Facebook, claim concerns about delivering services to EU users.

US-UK Developments

On Monday, 2 November, British Trade Secretary Liz Truss characterized the latest round of the US-UK trade negotiations as the “most intensive” thus far.  She addressed the UK Parliament’s International Trade Committee on Wednesday, fielding inquiries related to the bilateral trade negotiations.  Opposition Labour Member or Parliament Mark Hendrick asked,

If the animal welfare [standards] of, say, the United States – or any other country for that matter – don’t necessarily meet those we have here in the UK, will the government be persuaded to perhaps be more limited on the animal products imports, food in particular, where countries, such as the U.S., may not comply with our standards, which I think are much better?”

In response, Trade Secretary Truss affirmed standards would not be lowered.  She also argued the country should allow some imports from countries with lower standards, while adding the Government could use “techniques like quotas, tariffs and safeguards to make sure that [UK] farmers aren’t unfairly undercut by products that don’t follow the same high standards that we do in the United Kingdom.”

Trade Secretary Truss was also asked about US Democrats’ insistence the Good Friday Agreement remain intact, as Britain negotiates trade terms with the EU, especially if any final UK-US trade agreement is to be considered by Congress.  She stated,

We’re very clear that the Good Friday Agreement is absolutely critical.  We are determined to maintain that.  We do not want a hard border on the island of Ireland.  And that’s exactly what the politicians in the U.S. want as well.  And I am clear that we will achieve that.” 

Other UK Ministers have insisted in public that the Internal Market Bill, which is continuing to make progress through Parliament and which had provoked serious concern from the EU and from US President-Elect Biden, is intended to uphold the Good Friday Agreement.

Other UK Trade Development

On 6 November, the Department for International Trade (DIT) published a notice soliciting a pool of candidates it can consider when appointing arbitrators to general dispute settlement rosters for a number of agreements.  DIT is also seeking “candidates with experience in financial services law, international environmental law and international labour law for specialist rosters within some of these agreements.”

EU Trade Developments 

On 4 November, in the context of the COVID-19 pandemic, imports on renewable ethanol fuel have steadily increased and EU bioethanol industry reports pointed out the risk of damage to the internal industry that could come out from this increase.  Bioethanol is introduced at low prices resulting in the minimization of the local bioethanol industry margins. Commissioner for Trade Valdis Dombrovskis stated,

Our economies are still affected by the consequences of the pandemic and our recovery process should not be stalled by the distortive trade practices of third countries. This is why we must closely monitor any trade developments that potentially arise from unfair competition. This is the case with bioethanol today, but other industries may soon also require import surveillance so they can be better shielded from these unwelcome practices.”

The goal of the surveillance mechanism is to reduce imports therefore favoring the development of local industry.  This surveillance provides a one year protocol affecting every foreign producer trying to sell the products within the European Union market.

The European Commission published a summary of the results of the public consultation concerning the White Paper on Foreign Subsidies where it outlined the broader stakeholder contribution.  In particular, the summary stressed that the majority of Member States are “generally in favor of a legislative action to tackle distortive impact of foreign subsidies”, but there is a reservation by some countries with regard to the definition of subsidies, as it “may not cover certain cases of fiscal support”. The public consultation gathered a lot of interest with 150 submissions, out of which 17 were from Member States’ public authorities, and 24 from third-country stakeholders and governments.  Contributions from third countries have expressed criticism on the prospect of publishing regulation in addition to the existing rules.

The European Parliament’s International Trade Committee is calling for the creation of a Task Force focused on the EU-China trade relations.  According to a Draft Motion for Resolution on the EU Trade Policy Review, which is expected to be adopted on Monday, 9 November, the European Parliament will call on the Commission to progress on the negotiations for a Comprehensive Agreement on Investment with the People’s Republic of China (“China”), and encourage a common and unified EU Policy towards China.  The European Parliament is expected to adopt amendments that would ask the European Commission to analyze how to increase the resilience of EU supply chains to enhance production capacities in the EU, in the context of open strategic autonomy.

Digital Services Act | Sanction Regime for Illegal Content 

The European Commission looks forward to presenting its proposal for a regulation – the Digital Services Act – on 2 December.  The regulation would introduce new rules and prohibited practices for gatekeepers in the management of illegal content on internet platforms.  Many US tech giants are very likely to be impacted by the future regime.  The European Commission anticipates including in the proposal provisions that would authorize the imposition of fines up to €50 million and sanctions on content platforms.  Czech officials registered their government’s position on the Digital Services Act, stating,

We need to define what the obligations of digital services are, and also make sure that there is a clear legal framework for how exactly platforms should become aware of illegal content – without removing it by monitoring users’ content. This is the so-called notice and action mechanism.

Terrorist Attacks | France and Austria

Significant tensions are building in Europe as France and Austria have suffered terrorist attacks in the last weeks.  The shooting in Vienna, a night before the imposed COVID-19 lockdown, left four dead and 23 were injured in what was described by the Austrian Chancellor Sebastian Kurz as a “despicable terrorist attack” and by Interior Minister Karl Nehammer as “the hardest day Austria has witnessed for a long time.”  European leaders, such as European Commission President Ursula von der Leyen, UK Prime Minister Johnson and French President Emmanuel Macron, along with US President Trump and US Democratic presidential candidate Biden, expressed their solidarity with Austria and condemned such terror attacks.

On 5 November, President Emmanuel Macron reinforced France’s border controls with neighboring states, such as Spain, while also urging the EU to strengthen border controls in light of the attacks.  Spain reinforced its controls, as the city of Barcelona increased alerts, since it suffered terrorist attacks in 2017.

Also on 5 November, the French Government banned the Turkish party, Grey Wolves, characterizing it as an ultranationalist group.  The Turkish Ministry of Foreign Affairs denied the existence of the group, saying,

There is no such movement called the ‘Grey Wolves’ which the French government banned. This is the latest manifestation of the inconsistent approach used by France to look into the actions of some people who allegedly belong to this non-existent organization. It is, however, unacceptable to ban symbols that are widespread in many countries of the world and contain nothing illegal”.

President Macron has also threatened the Turkish Government with new sanctions. 

Disputes Updates | Eastern Mediterranean, Nagorno-Karabakh 

On 5 November, Romanian Foreign Minister Bogdan Aurescu addressed the Nagorno-Karabakh crisis before the Council of Europe Committee of Ministers.  In his intervention, Mr. Bogdan Aurescu called for the resumption of the peaceful and political dialogue, seeking potential negotiations in accordance of international law.

Turkey continues to support Azerbaijan, with Turkish President Recep Tayyip Erdoğan characterizing the relationship as “friendly and brotherly.”  Turkey has become a major weapons supplier to Azerbaijan.  Weapons that include modern technology, such as drones, which some have said are “game-changers” for the Nagorno-Karabakh conflict.  Turkey’s support to the Azeri Government ties back to a long-standing Turkish-Armenian feud that dates to the late Ottoman Empire.

New EU Belarus Sanctions 

On 4 November, the EU approved additional sanctions on Belarus, which include targeting President Alexander Lukashenko, his son (who acts as national security advisor) and 13 officials.  Visa bans and asset freeze sanctions were published on Friday, 6 November, following the EU’s attempt to persuade Mr. Lukashenko to engage in negotiations.  The EU does not recognize Mr. Lukashenko as Belarus’ legitimate president and continues to condemn the regime’s violent repression against protestors.  It is not the first time Mr. Lukashenko is targeted by EU sanctions – the former restrictions were lifted in 2015, after Lukashenko released political prisoners and carried out peaceful elections.

On 5 November, the State Department spotlighted the Organization for Security and Cooperation in Europe (OSCE)’s Moscow Mechanism report on Belarus (released that day), noting it described “sustained human rights violations and abuses committed on a massive scale and with impunity by the Belarusian authorities during the fraudulent August 9 election and its aftermath.”  US Secretary of State Mike Pompeo’s statement further reflected a roadmap for Belarusian authorities.  He noted this includes, “a robust OSCE/ODIHR (Office for Democratic Institutions and Human Rights) observation mission; an end to the violence against their own people and ensuring accountability for those found responsible for past abuses; the release of all those who have been unjustly detained; and engagement in meaningful national dialogue with authentic representatives of the political opposition and civil society.”

Frank SamolisMatthew Kirk and Wolfgang Maschek contributed insights to this report.