Transatlantic Trade Update text overlaid on top of images of US, UK and EU flagsMore countries joined the United States (US) this past week in calling for Russia’s “most-favored nation” status to be revoked at the World Trade Organization (WTO).  The European Union (EU) approved a fourth tranche of sanctions against Russia, as the bloc prepares yet another potential round of sanctions.  Furthermore, the United Kingdom (UK) designated an additional 370 Russian and Belarusian individuals under new authorities this week.

Looking ahead, US President Joe Biden is set to travel later this week (Wednesday) to Belgium to attend meetings with North Atlantic Treaty Organization (NATO) Allies, Group of Seven (G7) Leaders, and European officials to discuss international efforts to support Ukraine.  He will travel next to Warsaw on 25 March to meet with President Andrzej Duda and further discuss the humanitarian crisis stemming from the ongoing Russia-Ukraine conflict.

Meanwhile, the US focused this past week on Africa and the Indo-Pacific, with a trade official visiting Australia.  The UK focused on domestic energy security, while also releasing updated trade fact sheets.  In addition, the EU continues to see incremental progress on its International Procurement Instrument, Carbon Border Adjustment Mechanism (CBAM), and Sustainable Corporate Due Diligence proposals.

In this issue, we cover:

  • Ukraine and Russia, and transatlantic responses;
  • Other notable US, UK, and EU developments;
  • A brief UK-EU trade deal update; and
  • A brief COVID-19 update.

Ukraine-Russia | Western Allies Continue to Pressure Russia

On 15 March, the G7[1], EU and other like-minded countries[2] announced their intent to stop Russia’s “most-favored nation” treatment at the WTO.  European Commissioner for Trade Valdis Dombrovskis stressed in a statement,

This unprecedented decision sends a political signal of the highest magnitude. In practice, it deprives Russia of key trade advantages as a WTO member, by ensuring that the products of Russian companies no longer receive Most-Favoured-Nation treatment in our economies.”

Dombrovskis continued,

These actions are justified under the security exemptions of the WTO Agreement.  We will also suspend the accession of Belarus to the WTO.”

On 16 March, Ukraine President Volodymyr Zelenskyy addressed the US Congress virtually from Kyiv, continuing his virtual world tour of western legislatures.  He called on the United States to help institute a “no-fly” zone over Ukraine; if not that, to provide new air defense systems that would protect against Russian airstrikes and new aircraft for Ukrainian pilots to defend its airspace.  In closing remarks aimed at President Biden, President Zelenskyy stressed,

Being the leader of the world means being the leader of peace.”

Later that day, President Biden announced an additional US$800 million in new military assistance for Ukraine.  A White House fact sheet notes this new assistance includes shipments of anti-aircraft and anti-armor systems, small arms and ammunition, along with drones that Ukraine has also been requesting.

On 17 March, the US, European Commission, G7 countries and Australia issued a Joint Ministerial Statement after the inaugural meeting of the Task Force on Russian Elites, Proxies and Oligarchs.  They affirmed their intent to prioritize resources and work together “to take all available legal steps to find, restrain, freeze, seize, and, where appropriate, confiscate or forfeit the assets of those individuals and entities that have been sanctioned in connection with Russia’s premeditated, unjust, and unprovoked invasion of Ukraine and the continuing aggression of the Russian regime.”

On 18 March, the US Department of Commerce publicly identified commercial and private aircraft that have flown into Russia in apparent violation of the Export Administration Regulations (EAR).  Commerce’s Bureau of Industry and Security (BIS) reminded the public that providing any form of service to such aircraft requires authorization; violations of the EAR could subject a person to BIS enforcement actions, which could include jail time, fines, loss of export privileges, or other restrictions.

Also on 18 March, US President Biden spoke with President Xi Jinping of the People’s Republic of China (“China”).  A White House summary noted the discussion focused on Russia’s conflict with Ukraine, with President Biden describing “the implications and consequences if China provides material support to Russia.”

This week, the European Council agreed to yet another round of EU sanctions against Russia, related to the ongoing Russia-Ukraine conflict.  On 15 March, the Council endorsed the fourth package of sanctions prohibiting all transactions with certain Russian state-owned enterprises, the provision of any credit rating services to any Russian person or entity and new investments in the Russian energy sector.  The Council also introduced new export restrictions to equipment, technology and services for the energy industry, as well as tighter export restrictions on dual-use goods, goods and technology related to Russia’s defence and security sectors.  This package of sanctions introduced further trade restrictions on iron, steel and luxury goods from Russia.

The fourth EU package of sanctions also endorsed adding more Russian oligarchs (including Roman Abramovich and German Khan) and prominent business people in the iron, steel, energy, banking, media, military and dual-use products and services to the EU sanctions list, which includes asset freezes and travel bans.  Sanctions were also imposed on lobbyists and propagandists, as well as to companies in aviation, military and dual-use, shipbuilding and machine building sectors. With this latest package of sanctions, EU restrictive measures apply to a total of 877 individuals and 62 entities.

The next package of EU sanctions is already being discussed at the Council level, which will most likely include banning additional Russian banks from the SWIFT payments system, along with sanctions targeting Russia’s oil and gas sector.  Considering the ramifications related to the energy sanctions and potential retaliation by the Kremlin, the extent of the fifth package of sanctions remains unclear, especially since some Member States have expressed reservations.

On 16 March, the Council endorsed a legislative proposal that would mobilize cohesion policy funding to assist Ukrainian refugees.  Similarly, on 17 March, the EU signed an agreement with Moldova to increase cooperation between Moldovan border guards and the European Border and Coast Guard Agency (Frontex) in order to assist with border management control for Ukrainian refugees.

On 15 March, the UK Government announced a ban on exports to Russia of high-end luxury goods, while also hitting hundreds of key Russian products, such as vodka, with new import tariffs that represent a 35 percentage point hike on current rates.  That same day, British Foreign Secretary Liz Truss announced over 370 additional Russian and Belarussian designations, bring the UK’s total to over 1,000 individuals and entities sanctioned due to Russia’s actions in Ukraine.  These designations were the first under new authority from the UK’s Economic Crime (Transparency and Enforcement) Act, which has Royal Assent.

On 16 March, the British Government issued a statement “condemning those responsible for the reported abductions and abuse of Ukrainian activists, human rights defenders, volunteers, journalists, health-care workers and government representatives in the areas of Ukraine under control of the Russian army.”  At the beginning of the week, the UK Government announced it was donating more than 500 portable generators to Ukraine to support access to power for essential services in Ukraine, including hospitals and shelters.

UPCOMING, on 22 March, Squire Patton Boggs will participate in an event hosted by the American Bankruptcy Institute titled, “The Conflict in Ukraine: Impact on Capitals, Markets and Boardrooms.”  For information on or to register for the event, see this link.

US Developments

On 14 March, US Commerce Secretary Gina Raimondo met with Polish Minister for Economic Development and Technology Piotr Nowak.  A readout reflected Secretary Raimondo reiterated the Department’s commitment to expanding the US-Poland bilateral commercial cooperation, discussed commercial cooperation with the Polish Space Agency, and proposed a re-launch of the US-Poland Economic and Commercial Dialogue.

On 15 March, the US Department of the Treasury designated four individuals and one entity pursuant to the Sergei Magnitsky Rule of Law Accountability Act of 2012 (“Russia Magnitsky Act”).  Treasury stated,

These Russia Magnitsky Act targets were involved in concealing events surrounding the death of renowned Russian whistleblower Sergei Magnitsky, or were connected to gross violations of human rights against Russian human rights defender Oyub Titiev. Treasury is also re-designating Alyaksandr Lukashenka of Belarus, the head of a corrupt government in Belarus whose patronage network benefits his inner circle and regime, and newly designating his wife pursuant to Executive Order (E.O.) 13405.”

Deputy US Trade Representative Sarah Bianchi was in Australia this week, meeting with Australian officials (Australian officials readout; New South Wales government readout), along with business (American Chamber of Commerce readout) and labor stakeholders (Bechtel, and labor stakeholders readout), in Sydney and Canberra.  The American-led Indo-Pacific Economic Framework (IPEF) and opportunities to strengthen the US-Australian trade relationship, such as agricultural trade, were on the agenda.  She is also co-chaired a meeting of the US-Australia Free Trade Agreement (FTA) Joint Committee.

On 12 March, the US and African Union Commission (AUC) convened the eighth annual US-African Union High-Level Dialogue.  A readout reflected discussions centered on COVID-19 and pandemic recovery efforts, climate change, economic growth, and peace and security.  With respect to economic growth, the summary noted:

Officials reaffirmed U.S. support for the AfCFTA and other Agenda 2063 programs and projects to achieve sustainable economic development, build regional value chains, and increase both competitiveness and investment opportunities for mutual benefit. Participants discussed the importance of engaging with the private sector to increase trade and investment with Africa in pursuit of inclusive economic development, including by enhancing AGOA beyond its current framework.”

The US and AUC also signed a Memorandum of Cooperation to elevate and expand a public health partnership.

US Department of Agriculture (USDA) Secretary Tom Vilsack announced this week that the Foreign Agricultural Service (FAS) will resume in-person trade missions, with trips scheduled to the UK in June, the Philippines in July, Kenya at the end of October, and Spain at the end of November.  Secretary Vilsack recently returned from the United Arab Emirates, marking the launch of the return of in-person trade mission since the outbreak of COVID-19.  Meanwhile, the Biden Administration has yet to nominate a candidate to serve as Undersecretary for Trade and Foreign Agricultural Affairs, a position that oversees the FAS.

On 15 March, the White House and US Department of Transportation announced the launch of a major supply chain initiative, Freight Logistics Optimization Works (FLOW), to help speed up delivery times and reduce consumer costs.  Including eighteen initial participants, FLOW seeks to improve information sharing by piloting key freight information exchange between parts of the American supply chain.

Looking Ahead:  On 21 March, US Secretary of Commerce Gina Raimondo is hosting H.R. McMaster, former National Security Adviser during the Trump Administration, Matthew Pottinger, former National Security Council official during the Trump Administration; Eric Schmidt, the former CEO of Google; and Members of Congress for a virtual conversation about semiconductor manufacturing.  This move comes as reconciliation talks between the Senate and House of Representatives appears to have stalled over their respective competitiveness bills and the urgency surrounding funding to alleviate the ongoing semiconductor chip shortages (the US Innovation and Competition Act in the Senate; the America COMPETES Act in the House).

On 21-22 March, in Baltimore, Maryland, British Trade Secretary Anne-Marie Trevelyan is set to meet with US Trade Representative Katherine Tai to discuss potential bilateral collaboration to advance mutual international trade priorities rooted in shared values, while also promoting innovation and inclusive economic growth for workers and businesses on both sides of the Atlantic.  In a joint statement, Ambassador Tai said of the upcoming talks,

The United Kingdom is one of our oldest and most trusted allies, and our partnership is rooted in shared values and priorities. These Dialogues will provide an opportunity to engage our stakeholders to help inform how an inclusive trade policy can promote equitable economic growth and prosperity for our two countries.”

Secretary Trevelyan added,

Trade is central to the UK’s Levelling Up Agenda and how we will deepen UK-US trade links in a way that benefits communities across the United Kingdom.”

On 23 March, Ambassador Tai will participate in a virtual G7 meeting.  On 24 March, the Ambassador will participate in an AmChamEU virtual fireside chat with European Commission Executive Vice President Dombrovskis.

UK Developments

On 18 March, the UK Department of International Trade released its updated trade fact sheets, summarizing the latest statistics on trade and investment between the UK and its trading partners.  For the most up to date overall summary the UK’s trade and investment position, see the trade and investment core statistics book here.

British Prime Minister Boris Johnson travelled to the United Arab Emirates and Saudi Arabia on 16 March.  Seeking to further galvanise global action on the crisis in Ukraine, the Prime Minister discussed humanitarian relief, along with energy and regional security matters.  Saudi Arabia’s Alfanar Group confirmed a £1 billion investment in the Lighthouse Green Fuels Project in Teesside, aiming to be the first company to produce sustainable aviation fuel from waste at scale in the UK.

On 14 March, Prime Minister Johnson hosted a roundtable of leaders in the UK’s offshore oil and gas industry to discuss domestic energy security.  According to 10 Downing Street,

This is part of a series of engagement by the Government across the UK’s energy sectors, including with renewable and nuclear companies in the coming days and weeks.”

Also on 15 March, the UK and Netherlands concluded their annual Cyber Dialogue, with interagency consultations on cyber security in London.  A British summary reflected,

Both sides agreed to further strengthen their bilateral cooperation with regard to deterring malicious cyber activity and irresponsible conduct in cyberspace.”

EU Developments

Early in the week, the French Presidency of the European Council and the European Parliament reached a political agreement on the inter-institutional negotiations related to the International Procurement Instrument.  The new trade defensive tool, when applied, will ensure market access and a level playing field for EU companies in third countries’ public procurement markets.  Some procedural steps remain before a formal endorsement of the proposed rules, which is expected in May or June.  Meanwhile, on 14 March, the European Commission informed the WTO of the intention to suspend an ongoing dispute against Russia regarding some discriminatory public procurement practices in Russia.

On 15 March, the Economic and Financial Affairs (ECOFIN) Council endorsed the General Approach for the proposal for a Carbon Border Adjustment Mechanism, a key priority of the French Presidency.  The Council’s text does not deviate significantly from the European Commission’s proposal with respect to implementation, scope and timetable for entry into force.  Importantly, the General Approach does not address the contentious elements of the proposal, such as CBAM revenue uses or the withdrawal of free allowances under the Emissions Trading System (ETS).  There remains several elements of the proposed law where a decision is outstanding, such as the phasing out of free allowances, the way the revenues will be handled, and international carbon pricing concerns.  As such, despite the General Approach being reached in principle, the Council must still ensure there will be sufficient progress on these other elements of the proposal before proceeding with the trilogue negotiations with the European Parliament.  Thus, negotiations in the European Parliament continue, with a possible agreement expected by June.

The Council and the European Parliament are due to commence their respective negotiations on the far-reaching proposal for a Sustainable Corporate Due Diligence, published in February.  An overview of the proposed rules and possible implications the rules can have on businesses can be found in our client alert.

After the publication of the EU Chips Act (see our client alert for an overview of the rules), European Commission (EC) President Ursula von der Leyen welcomed Intel’s investment announcement of over 33 EUR billion to develop the bloc’s semiconductor value chain.  EC President von der Leyen reiterated one of the main goals of the EU Chips Act is to make Europe a more attractive place for tech companies to invest in cutting-edge chips research and development and production, which makes this announcement “a first major achievement under the EU Chips Act.”

On 16 March, the European Commission announced its decision to impose anti-subsidy duties on imports of stainless steel, cold-rolled flat products originating in Indonesia and India.  Similarly, the European Commission decided to take action against preferential financing provided by China to Indonesia, within a complex subsidy arrangement designed for export to the EU.

UK-EU Trade Deal Update

This week, the European Commission approved 2 billion EUR of pre-financing for 12 Member States, in the context of the Brexit Adjustment Reserve, a funding mechanism to assist Member States regions, sectors, or local communities that have been affected due to the UK’s withdrawal from the EU.

Earlier in the week, Northern Ireland’s highest court ruled that despite technical difficulties linked to its implementation, the Northern Ireland (NI) Protocol is constitutionally lawful, rejecting efforts to overturn the Protocol.  It remains unclear whether this case will be referred to the UK Supreme Court.

Meanwhile, a report published by the House of Commons European Scrutiny Committee, underlines that NI’s status within the EU single market could become untenable, considering there currently are 29 pending pieces of EU legislation that NI may be required to adopt.  The report particularly notes,

This situation is untenable and is a stark illustration of the damage that the protocol is having on democracy in the U.K.”  The report further notes the NI Protocol is “an avenue for the continued applicability of EU law in Northern Ireland that, unless repaired, replaced or removed, could develop into a motorway.”

It adds,

All without the meaningful input – or final say on individual pieces of legislation – of the people of Northern Ireland.  This cannot continue.”

With respect to Northern Ireland’s dependency on medicine produced and packaged in Great Britain (GB), the report welcomes the recent European Commission proposal approved by the Council last week that extends grace periods for medicines.  However, it further stressed,

There remains a risk that the same medicines are not available in both GB and NI in the event that EU and GB regulators take different views”.

COVID-19 Update

After months of negotiations, diplomats from the US, EU, India and South Africa reportedly reached a compromise with respect to the WTO’s TRIPS Waiver for COVID-19 vaccines.  Nevertheless, WTO Secretary General Ngozi Okonjo-Iweala cautioned “that not all the details of the compromise have been ironed out and that internal domestic consultations within the four members are still ongoing.

[1] The G7 consists of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.

[2] Albania, Australia, Iceland, Republic of Korea, Moldova, Montenegro, New Zealand, North Macedonia, and Norway.