Transatlantic Trade Update text overlaid on top of images of US, UK and EU flagsThe European Union’s (EU) COVID-19 vaccine export control mechanism continued to be heavily criticized this past week, including a proposal that would have invoked Article 16 of the Northern Ireland Protocol.  This led to increased tension between the United Kingdom (UK) and EU, amid continuing post-Brexit border customs concerns with Northern Ireland.  In the United States (US), the Democratic-led Congress is maneuvering to advance another sizeable COVID relief package, as mask mandates and civil penalties went into effect for public transportation across the country.  The US Government is also moving forward with its approval process of Johnson & Johnson’s COVID candidate vaccine. Meanwhile, the Biden Administration is moving to reassert global leadership, by working with allies to address the situation in Burma and developments related to Alexei Navalny’s imprisonment in Russia.

In this issue, we also cover:

  • COVID-19 developments more broadly in the US, UK and EU;
  • A more in-depth look at the EU’s vaccine export control mechanism;
  • EU-UK trade deal developments;
  • Other UK, EU and US developments (such as antitrust legislative developments in the US);
  • A brief US-EU update; and
  • Sanctions developments in the US and EU

COVID-19 Updates | US, UK, EU

On Monday, 1 February, ten Republican Senators unveiled a compromise COVID-19 relief proposal ($618 billion) ahead of meeting with US President Joe Biden to discuss a bipartisan path forward.  Republicans note that some $1 trillion in previously approved assistance remains unspent and argued for direct payments to households to be cut from $1,400 to $1,000, with new limitations.  After the meeting, President Biden indicated some flexibility in lowering the household eligibility threshold so that a more targeted group of Americans receives the assistance checks.

Despite Republican efforts to reduce the size of the next COVID relief package, Democrats are moving forward under the budget reconciliation process to advance a $1.9 trillion COVID relief package by a simple majority.  Democratic lawmakers cleared procedural hurdles allowing congressional committees to begin drafting sections of the relief package this coming week.  House Democratic lawmakers also met Friday morning with President Biden to discuss his “American Rescue Plan” and the budget resolution process.  In an interview that aired on Sunday, 7 February, President Biden conceded that raising the minimum wage via the relief package may not be possible, adding he would continue to work on this via a standalone measure.  Democrats are pushing in hopes of presenting President Biden with a COVID relief package by mid-March, when some existing relief programs lapse.

The Biden Administration is moving forward with its mask compliance mandates.  On 31 January, the US Transportation Security Administration (TSA) said that travelers over the age of two that do not wear masks on public transportation (airlines, in airports, on buses, railways, etc.) would face fines ranging from $250 for the first offense to up to $1,500 for repeat offenders.  Effective 2 February, US Customs and Border Protection confirmed it is enforcing the requirement that travelers wear face masks at all air, land and sea ports of entry in the United States.

On Thursday, 4 February, the US Food & Drug Administration (FDA) announced the Vaccines and Related Biological Products Advisory Committee (VRBPAC) would meet on 26 February to discuss an emergency use authorization (EUA) for the COVID-19 vaccine developed by Janssen Biotech Inc., a division of Johnson & Johnson.  The FDA also continues to monitor emerging virus variants circulating globally, and especially in the United States.  This includes assessing the impact of new strains on authorized products and continuing to work with companies and international partners to evaluate the impact that each variant may have on effectiveness or utility of vaccines and treatments.

The UK is moving forward with a study to explore giving different approved COVID-19 vaccines in a two-dose regimen with different timing on the second dose, amid news that the B.1.1.7 variant (a.k.a., UK variant) is more deadly.  The UK Government approved £7 million for the study that commenced on 4 February.  The 13-month study will monitor the impact of the different dosing regimens on patients’ immune responses, with initial findings from the study due this summer.  Meanwhile, on 3 February, the UK Government noted that more than 10 million people (or one in five adults) in the UK have received their first dose of a COVID-19 vaccine.

On Friday, 5 February, Britain’s Department of Health and Social Care (DHSC) confirmed that from 15 February anyone travelling to the UK from a country on the UK’s travel ban list will be required to quarantine in a government-approved facility for a period of 10 days.  The day before, DHSC issued a commercial specification to hotels near ports and airports, asking for proposals on how they can support the delivery of Managed Quarantine Facilities ahead of formal contracts being awarded.  Further details will be shared this coming week on how passengers will be able to book into the designated accommodation facilities.

In the EU, Director General of the Health and Food Safety Directorate General of the European Commission Sandra Gallina, who led the advanced purchase agreements negotiations with the pharmaceutical companies for the COVID-19 vaccines, responded to last week’s AstraZeneca controversy during her intervention at the European Parliament’s Budget Committee, following the publication of a redacted version of the contract.  Gallina dismissed AstraZeneca’s CEO claims regarding the interpretation of “best endeavors” to deliver vaccines, considering that this does not exonerates the company from delivering the vaccines “within a certain schedule”.  She clarified that the problem with the vaccine doses is currently related to manufacturing capacity, rather than the money spent by the EU.  Gallina also defended the European Commission’s insistence to put in place a liability regime, which was one of the main reasons the EU signed the contract with the pharmaceutical company later than other countries.

Despite last week’s controversy regarding the AstraZeneca vaccine doses provided to EU Member States under its contractual obligations, the European Medicines Agency (EMA) recommended the approval for the conditional marketing authorization for the COVID-19 vaccine of AstraZeneca/Oxford University, followed by the European Commission’s formal approval on 29 January.  AstraZeneca in turn pledged to deliver nine million additional doses, or a total of 40 million of its vaccine in the first quarter, as well as expand its manufacturing capacity in Europe.

European Commission President Ursula von der Leyen held a videoconference with the CEOs of pharmaceutical companies that have advanced purchase agreements for their COVID-19 candidate vaccines (BionNTech/Pfizer, Moderna, AstraZeneca, Johnson & Johnson, Curevac and Sanofi) to explore requirements for the rapid development, manufacturing and regulatory approval of vaccines for the COVID-19 variants.  The industry’s role in helping to improve Europe’s pandemic preparedness will be crucial particularly the context of the new EU Health Emergency Preparedness and Response Authority (HERA), which is to be established in the future.

EU COVID-19 Vaccine Export Control Mechanism

The European Commission published an export control mechanism on 29 January to address the lack of transparency of COVID-19 vaccine distribution through the Implementing Regulation 2021/111. The Implementing Regulation entered into force on 30 January 2021 and shall last until 31 March 2021.  The measure restricts exports to an “absolutely necessary” extent covering only vaccines under the Advanced Purchase Agreement and calls for pharmaceutical companies to meet their obligations to deliver their contractual commitments, despite having contracts with third-party countries.  The EU Commission published a Q&A guidance that includes further information on implementation of this regulation.

Most importantly, the European Commission triggered by means of emergency the Article 16 of the Northern Ireland Protocol, which offers the option to override unilaterally the Protocol under certain circumstances.  Many responded to this move with criticism .  Northern Ireland’s First Minister Arlene Foster, called the suspension of the Northern Ireland post-Brexit trade protocol an “incredible act of hostility.” Former EU Commission President Jean-Claude Juncker said of the move, We are … not just responsible for ourselves. This is a pandemic that affects everyone on this planet. I am very much opposed to the European Union now giving the impression that we are taking care of ourselves and that the suffering of other people, especially in poorer countries and on poorer continents, does not affect us.”  Others criticising the EU’s proposed measure included Irish Commissioner Mairead McGuinness, Irish Prime Minister Micheál Martin and former EU Brexit Chief Negotiator Michel Barnier. The criticism resulted in a statement from the European Commission that explained its decision not to trigger the safeguard mechanism. The export control regulation in itself has also been strongly criticised by other countries for creating a “damaging precedent for trade restrictions” and “undermining the EU’s credibility” as an open trade partner.

The EU provided assurances to the British Trade Secretary Liz Truss that vaccine exports to the UK would not be disrupted by the new export control mechanism, after it admitted the mistake of triggering Article 16 of the Northern Ireland Protocol and reversed course on that matter.  British Trade Secretary Truss said of that action, “We’re pleased that the EU admitted that the Article 16 invocation … for the border in Ireland was a mistake and they are now not proceeding with that. It is vital we keep borders open and we resist vaccine nationalism and we resist protectionism.”

Meanwhile, European Commission President von der Leyen will be addressing the European Parliament this coming week on 10 February.  She is expected to address the shortcomings of the vaccine strategy in the EU, which has come under increased criticism.

UK-EU Trade Deal | Updates

Tension between the EU and UK negotiators at the Joint Committee was also observed this week, following the EU’s initial intention to override the Northern Ireland Protocol for its export control mechanism on COVID-19 vaccines.  UK Prime Minister Boris Johnson also warned this week that the UK could consider invoking the same safeguard clause of the Northern Ireland Protocol if other border custom controls continue to persist between Northern Ireland and Great Britain.

Following reports of food shortages in January 2021, the Irish Government announced that good shipments have doubled with France and halved with Britain during the first post-Brexit month.  The operational update from the Irish Government demonstrates that the bureaucratic hurdles faced by EU freight crossing from continental Europe through Great Britain’s motorways is the main reason for this shift; consequently, sea routes from France with goods that bypass Britain have doubled in recent weeks.

Cabinet Office Minister Michael Gove and European Commission Vice President Maroš Šefčovič issued a joint statement on 3 February following the Withdrawal Agreement Joint Committee meeting.  The meeting attempted to find solutions on the current trading problems and bureaucratic red tape, one month into the post-Brexit custom regime.  The UK suggested the customs grace periods be extended on trading between Great Britain and Northern Ireland for approximately two years, which would allow for trading continuation while the two partners renegotiate elements of the Protocol to address these shortcomings.  The European Commission Vice President, however, did not seem to be open to amending the Protocol; he instead called on using the flexibilities provided by the Protocol to address the current problems.  The two sides expect to work on devising possible solutions ahead of their meeting next week.

Meanwhile, the European Parliament’s Foreign Affairs and International Trade Committees continued to assess the EU-UK trade and Cooperation Agreement on 4-5 February 2021.  Once both Committees approve their recommendation, currently anticipated for 17 February, the European Parliament’s plenary could endorse the formal ratification of the trade deal.

Notable UK Developments

On 1 February, the UK submitted its notification of intent letter to begin the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) accession process.  The UK affirmed accession to the CPTPP is a top priority, adding UK accession could see CPTPP’s proportion of global GDP rise to 16 percent.  The UK will publish its outline approach, scoping analysis, and response to public consultation before negotiations commence.

On 4 February, the UK and Ghana finalised negotiations on a new Interim Ghana-UK Trade Partnership Agreement.  Upon completion of relevant domestic procedures in both countries, the agreement provides for duty free and quota free access for Ghana to the UK market and preferential tariff reductions for UK exporters to the Ghanaian market.

On 5 February, the UK secured a new Partnership, Trade and Cooperation Agreement with Albania.  The agreement will strengthen political, trade, security and cultural ties, as well as deepen cooperation against organised crime.

Notable EU Developments

The Portuguese-led Council Presidency continues to push for ratification of the EU-Mercosur trade agreement.  Authorities from both sides agreed on the need to make progress on outstanding issues in order to bring all parties together toward signing the agreement.  On 3 February, French officials claimed that France would “not give in” to the efforts to signing the ratification.  Minister Franck Riester said France’s priority is “implementing the Paris Agreement”, delivering a clear message of France’s concerns with Amazon deforestation and climate change implications.

In January, Portugal Minister of Foreign Affairs Augusto Santos Silva opened a new pathway for the EU and India to improve cooperation relations, saying, If you talk with China, and you have to talk with China as the second economy of the world and the world’s most populated country, you have also to talk with India”.  Talks with India would include technology, climate change and trade, embracing a multi-dimensional relationship.  A potential deal with India could in turn result in less dependency on the People’s Republic of China (“China), which some EU member states may find appealing.  The EU-China talks on an investment agreement have sparked objections from some EU member states that have objected to China’s actions crackdowns in Xinjiang (concerning Uighur minorities) and in the Hong Kong Special Administrative Region, both in the People’s Republic of China.  This year may be key for a possible EU-India deal, as initiatives such as “All But China” have led to supply chain shifts in 2020.

Notable US Developments | Biden Sets Out Foreign Policy Priorities; Antitrust Bill Unveiled

On Thursday, 4 February, President Biden outlined his foreign policy priorities in remarks at the Department of State, reaffirming a return to diplomacy.  He stated, “American leadership must meet this new moment of advancing authoritarianism, including the growing ambitions of China to rival the United States and the determination of Russia to damage and disrupt our democracy.”  President Biden added, “We’ll confront China’s economic abuses; counter its aggressive, coercive action; to push back on China’s attack on human rights, intellectual property, and global governance.  But we are ready to work with Beijing when it’s in America’s interest to do so.”

President Biden also signed several related executive actions.  The Presidential Memorandum on “Advancing the Rights of LGBTQI+ Persons Around the World” reaffirms the policy of the United States to pursue an end to violence and discrimination based on sexual orientation, gender identity or expression, or sex characteristics.  This includes combating criminalization of LGBTQI+ status or conduct abroad.  The Presidential Memorandum on “Renewing the National Security Council (NSC) System” reasserts the NSC as the center of addressing national security policy concerns and outlines the NSC’s structure.  The President’s “Memorandum on Revitalizing America’s Foreign Policy and National Security Workforce, Institutions, and Partnerships” outlines how national security and foreign policy institutions are to be revitalized. This also includes expanding partnerships with likeminded countries and acknowledges US state and local governments have a role in advancing policy changes, such as those related to climate change.  President Biden also signed an Executive Order (E.O.) focused on migrants and planning for climate change-driven migration.

On Tuesday, 2 February, President Biden rescinded a proclamation signed by former President Donald Trump that cancelled Section 232 tariffs on aluminum imported from the United Arab Emirates.  He also signed a number of immigration-related executive actions.  Meanwhile, US European Commander General Tod Wolters said on Wednesday that all plans related to the Trump Administration’s troop withdrawal from Germany have been put on hold, pending a review by the Biden Administration and Secretary of Defense Lloyd Austin.

On Thursday, Senator Amy Klobuchar (D-Minnesota) introduced comprehensive legislation to update US antitrust laws; further signaling her intent to take on Big Tech as she assumes the gavel for the Senate Judiciary Committee’s Antitrust Subcommittee.  In a 28 January statement, Senator Klobuchar noted existing laws are current antitrust laws are inadequate for regulating companies like Amazon, Apple, Facebook and Google.  She said of market dominance in the technology sector, “This concentration of power has raised troubling questions about personal privacy, the security of our elections, and the spread of toxic disinformation.”  She praised antitrust enforcers under the Trump Administration for their landmark lawsuits targeting Google and Facebook, adding the Biden Administration’s Justice Department will likely continue to advance these cases.

In announcing the Competition and Antitrust Law Enforcement Reform Act, Senator Klobuchar said, “Competition and effective antitrust enforcement are critical to protecting workers and consumers, spurring innovation, and promoting economic equity. While the United States once had some of the most effective antitrust laws in the world, our economy today faces a massive competition problem. We can no longer sweep this issue under the rug and hope our existing laws are adequate.”  The bill would increase enforcement resources; strengthen prohibitions against anticompetitive mergers, including shifting the burden to merging partners to prove their merger will not violate the law; prevent dominant firm conduct; establish a new, independent Federal Trade Commission division to conduct market studies and merger retrospectives; and implement reforms that include civil fines for antitrust violations; among other things.  Additional co-sponsors of the bill include Judiciary Antitrust Subcommittee members Senators Richard Blumenthal (D-Connecticut), Cory Booker (D-New Jersey), Ed Markey (D-Massachusetts), and Brian Schatz (D-Hawaii).

After Korean Trade Minister Yoo Myung-hee withdrew from the World Trade Organization (WTO) Director General race on Friday, the Office of the US Trade Representative (USTR) issued a statement of support for the remaining candidate.  USTR said, “The Biden-Harris Administration is pleased to express its strong support for the candidacy of Dr. Ngozi Okonjo-Iweala as the next Director General of the WTO.”  The statement also acknowledged Yoo’s successful campaign and Friday withdrawal, saying, “The United States respects her decision to withdraw her candidacy from the Director General race to help facilitate a consensus decision at the WTO.”  The Trump Administration had supported Yoo’s candidacy.  USTR concluded by stating, “The Biden-Harris Administration looks forward to working with a new WTO Director General to find paths forward to achieve necessary substantive and procedural reform of the WTO.”

US-EU Developments

In an attempt to enhance EU-US transatlantic relations, European Commission Executive Vice-President Valdis Dombrovskis stressed the EU’s invitation to create a transatlantic high-level Trade and Technology Council to cooperate on common trade matters and challenge “state-led economic models”.  During a 3 February speech, European Council President Charles Michel echoed the desire for increased transatlantic cooperation, particularly in relation to the  EU-US tech agenda.  The US Chamber of Commerce welcomed the EU’s suggestion of establishing a Trade and Technology Council that would address issues of friction in the global trade and investment spectrum.

US-UK Development

The US Chamber of Commerce further urged the Biden Administration to conclude trade negotiations with the United Kingdom.  The Chamber is pushing for a comprehensive deal, not one that includes a separate financial services pact.

Sanctions Updates | EU, US

On Wednesday, 3 February, EU High Representative condemned the Russian authorities’ prison sentence decision for Russian President Vladimir Putin’s opponent Alexei Navalny.  In a statement, the EU called for the immediate and unconditional release of detained civilians, journalists and Navalny.  EU leaders will discuss the issues and next steps arising by Russian authorities’ “unacceptable” decision in the upcoming Foreign Affairs Council.

Also on Wednesday, a bipartisan group of Senators introduced a sanctions bill that, if approved by Congress, would impose sanctions on “Russian officials complicit in brazen violations of international law.”  According to a press release, the Holding Russia Accountable for Malign Activities Act of 2021 measure “would impose sanctions on Russian officials complicit in brazen violations of international law including the poisoning and imprisonment of opposition leader and anti-corruption activist Alexei Navalny.”  The bill also requires a report on the assassination of Russian opposition politician Boris Nemtsov and “on the personal wealth amassed by the corrupt practices of Vladimir Putin and his inner circle.”

While at the State Department on Thursday, President Biden shared, “we’ve been in close cooperation with our allies and partners to bring together the international community to address the military coup in Burma.”  He also confirmed consultations with Senate Republican Leader Mitch McConnell (R-Kentucky, adding, “The Burmese military should relinquish power they have seized, release the advocates and activists and officials they have detained, lift the restrictions on telecommunications, and refrain from violence.”  Leader McConnell has called for the imposition of new US sanctions, noting Congress has already given the Executive Branch the authorities it needs to apply more sanctions to the military.  (Under the Biden Administration, the US Government has reverted to referring to the country as Burma, not Myanmar.)

On Friday, Senators Jim Risch (R-Idaho), Edward Markey (D-Massachusetts), Robert Menendez (D-New Jersey) Marco Rubio (R-Florida) outlined steps the Biden Administration could take to address the situation in Burma.  Among others, they recommended the Administration:

  • Impose targeted sanctions on the senior leadership of the Tatmadaw and other military-affiliated individuals;
  • Push for multilateral economic and diplomatic pressure with European and Indo-Pacific allies; and
  • Press for quick and serious United Nations (U.N.) consideration of the situation in Burma via the U.N. Security Council.

The EU High Representative issued a statement condemning the “coup by the Tatmadaw” in Myanmar, expressing EU support for the country’s constitution and democratic process and calling for international partners to act in a coordinated response.  The EU is considering whether to extend sanctions on top military members and limit Myanmar preferential trade terms, such as the “Everything But Arms” duty-free regime.  The Council is expected to discuss next steps, particularly whether to impose EU-wide sanctions.

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