Transatlantic Trade Update text overlaid on top of images of US, UK and EU flagsAfter multiple top European officials’ visits to Kyiv, the United States (US) Government dispatched two Cabinet-level officials to Ukraine, marking the return of American officials to the country and a re-opening of the US Embassy, since the conflict with Russia started in late February.  The United Kingdom (UK) also announced its Embassy was re-opening in Kyiv last week.

The US President formally requested a replenishment of emergency funds for the Ukraine conflict, along with new authorities that could, among other things, further impact seized Russian oligarch assets.  Meanwhile, the US and European Union (EU) continue to prepare for the upcoming US-EU Trade and Technology Council (TTC) meeting in France in mid-May, with the US holding a stakeholder engagement event and meeting with EU officials.  The UK announced it is furthering trade talks with Switzerland and India.  In the EU, the bloc reached a political agreement on the Digital Services Act.  Debate on the Sustainable Corporate Due Diligence proposal continues, while a separate legislative proposal addressing forced labour restrictions has emerged.

In this issue, we cover:

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

Ukraine-Russia | Western Allies Updates

US Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin travelled to Kyiv on 24 April, marking the most senior US officials to travel to Ukraine to meet with Ukrainian officials, since the conflict with Russia began.  During their trip, US President Joe Biden announced his intent to nominate Ambassador Bridget Brink, currently the US Ambassador to Slovakia, to be the next American Ambassador to Ukraine, if confirmed by the US Senate.

Secretary Blinken affirmed American diplomats would also return to the US Embassy in Kyiv that week.  He further shared the US intends to obligate more than $713 million in Foreign Military Financing (FMF) for Ukraine and 15 other Allied and partner nations in Central and Eastern Europe and the Balkan region.  Secretary Austin informed Ukrainian officials that the US Department of Defense is expanding military training for Ukrainian service members in the region on certain weapons systems being provided by the US Government.

On 21 April, the US announced its intent to provide Ukraine with a second $500 million grant in direct economic assistance, in addition to an announcement of $500 million made by President Biden in March.  The US Department of Commerce’s Bureau of Industry and Security (BIS) issued an order temporarily denying all export privileges for the Russian cargo aircraft carrier Aviastar due to ongoing violations of the comprehensive export controls imposed on Russia by the Department.

On 20 April, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated entities and individuals involved in attempts to evade sanctions imposed by the United States and international partners on Russia.  OFAC designated Russian commercial bank Transkapitalbank and a global network of more than 40 individuals and entities led by US-designated Russian oligarch Konstantin Malofeyev, including organizations whose primary mission is to facilitate sanctions evasion for Russian entities.  OFAC also designated companies operating in Russia’s virtual currency mining industry, reportedly the third largest in the world.

After depleting a $13.6 billion package the US Congress approved in early March for Ukraine, President Biden formally submitted an additional supplemental funding request of $33 billion to American lawmakers on 28 April.  The President requested $20 billion in defense spending for Ukraine and US allies in the region, along with $8.5 billion to help Ukraine President Volodymyr Zelenskyy’s Government to provide services and pay salaries.  The request also includes $3 billion in global food and humanitarian programs, money that could help Ukrainian refugees and American farmers to grow wheat and other crops to replace crops Ukraine has provided globally, prior to the conflict.  The biggest potential stumbling block to Congressional action is Democrats’ desire to also consider billions more to combat the COVID-19 pandemic, while Republicans are seeking to address the Administration’s desire to lift a COVID-related border immigration policy, Title 42.

Also on 28 April, President Biden asked the US Congress for new authority to seize the assets of Russian oligarchs and allow the US Government to sell the assets and use the proceeds to help the people of Ukraine.  The President has requested that Congress make it a crime to “knowingly or intentionally possess proceeds directly obtained from corrupt dealings with the Russian government,” double the statute of limitations for foreign money laundering offenses to 10 years, and expand the definition of “racketeering” under US law to include efforts to evade sanctions.

On 27 April, UK Foreign Secretary Liz Truss described Britain’s position on Ukraine-Russia conflict in a speech at the Mansion House.  In sum, she stated geopolitics is back and argued for a reboot in the free world’s approach to tackling “aggressors”.  Foreign Secretary Truss said,

The architecture that was designed to guarantee peace and prosperity has failed Ukraine.  The economic and security structures that were developed after the Second World War and the Cold War have been bent out of shape so far, they have enabled rather than contained aggression.”

The British Government announced a new wave of 26 sanctions targeting defence actors on 21 April.  The UK designated the following Russian military commanders:  Lt Colonel Azatbek Omurbekov; Colonel General Andrey Serdyukov, Commander of Airborne Forces; Major General Valery Flyustikov, Commander of Special Operations Forces; and Colonel General Nikolay Bogdanovsky, First Deputy Chief of the General Staff.  Also sanctioned were Oleg Belozyorov, the CEO and Chairman of vital logistics company Russian Railways; and Ilya Kiva, the defecting and expelled Ukrainian MP who has publicly supported Russia’s actions in Ukraine.  As part of the sanctions, 19 individuals and entities were also fast-tracked.

On 25 April, the UK Government announced new measures to support Ukraine, including the removal of all tariffs covered by the existing UK-Ukraine trade deal.  The British Government also announced an export ban on products and technology to Russia.  Separately, the UK is sending more ambulances and fire engines to Ukraine as part of continued support to the country.

Ahead of US Secretaries Blinken and Austin’s trip to Kyiv, the UK Government announced on 22 April that the British Embassy would re-open in Kyiv the next week.  Similar to other Embassies, the British temporarily closed their Embassy in Kyiv amid escalating tension between Ukrainian and Russian forces near the city.

On 29 April, British Foreign Secretary Truss announced the UK Government would deploy a team of war crimes experts to support Ukraine with its investigations.  The Foreign Secretary also travelled that day to The Hague for talks with ICC Court President, Judge Piotr Hofmanski, at the International Criminal Court (ICC).

The EC shared its preliminary assessment with Member States on the impact of the Russian decree obliging foreign buyers to pay for natural gas in rubles.  The Commission affirmed its assessment that such payments would be a breach of the existing EU sanctions regime adopted by the EU.  The preliminary assessment further stated the procedure of payment established, would deprive European companies of all type of control during the moment of effective payment, and European companies could then be breaching their obligations of the contracts signed with Russia’s Gazprom.

The EC published on 21 April guidance to advise EU companies buying Russian gas on how to circumvent Moscow’s demand to pay their supplies in rubles, without violating EU sanctions.  The Commission underscored companies could issue a statement declaring that their payment obligations are concluded once their payment in dollars or euros have been deposited, in line with existing contracts.  However, the Commission advises the companies “seek confirmation from the Russian side that this procedure is possible under the rules of the Decree”.

Last week, Gazprom halted exports of gas to Poland and Bulgaria.  European Commission (EC) President Ursula von der Leyen issued a statement denouncing the action as Russian ‘blackmail’ and reiterated the EC’s continuous effort to coordinate gas supply and storage remains available in the EU in the medium term.

The International Energy Agency (IEA) presented nine recommendations for households to conserve energy and lower their Russian energy dependency in support of Ukraine.  For Europe, the dependency on Russian oil and gas will require ether voluntary cutbacks or government-imposed rationing.

An emergency EU Energy Ministers meeting is set to be convened that will focus on the latest developments with Russia and how to diversify energy sources in the bloc.  Both Poland and Bulgaria asserted they would function well without gas from Russia.  Bulgaria established the first regional platform, as part of the EU’s Energy Purchase Platform, on 28 April, and will examine gas and electricity needs, prices and flows, as well as infrastructure challenges.

EU Ambassadors have been deliberating over the evolving situation in Ukraine and the draft proposals that would comprise the sixth package of sanctions.  The EC is still drawing up the proposals for another possible round of sanctions; EU diplomats made no decision at this stage of the discussions.  However, the final version of the sixth package of sanctions – expected to target the oil, banking sectors, and possibly including further exports restrictions – could be formally presented to Ambassadors this coming week.  The possibility of sanctions targeting a uranium import ban from Russia is also gaining ground in the talks.  Meanwhile, the EC issued a legislative proposal on 27 April calling for a temporarily lift of all tariffs and duties for Ukrainian imports, as a measure to ease the financial burden for Ukraine given the protracted conflict.

During the Group of 20 (G20) meeting on 20 April, several finance ministers, including other officials from the US, UK, Canada, Ukraine and the EU, decided to leave the room during the time that Russian officials took the floor.  Among others, this included US Secretary of the Treasury Janet Yellen, European Central Bank President Christine Lagarde and European Commissioner for Economy Paolo Gentiloni.

US Developments

On 26 April, the Dow Jones Industrial Average plunged more than 800 points, and the Standard & Poor’s 500 Index dropped almost 3 percent.  The Dow has fallen for four weeks in a row and the S&P 500 for three straight weeks.  Polling data is also showing American consumers are losing confidence in the economy and in the ability of President Biden and the Democrats to manage the nation’s finances.  Despite these troubling signs, US Treasury Secretary Yellen said on 22 April that she does not see the American economy falling into a recession anytime soon.  Meanwhile, the International Monetary Fund cut its expectation for US growth in 2022 to 3.7 percent, down from its 4 percent forecast in January.

On Thursday, 27 April, US Trade Representative Katherine Tai met with World Trade Organization (WTO) Director-General (DG) Dr. Ngozi Okonjo-Iweala.  Without specifically referencing the WTO TRIPS waiver for COVID-19 vaccines, a readout of the discussion reflected they “discussed COVID-19 and the ongoing discussions among WTO Members to reach a meaningful outcome on a pandemic response.”  The summary further reflected,

Ambassador Tai stressed her commitment to continued engagement with members of Congress and stakeholders as the WTO works to break the deadlock on this issue and get as many safe and effective vaccines to as many people as fast as possible.”

Other topics discussed included the upcoming WTO 12th Ministerial Conference (MC12), global food security concerns, and supply chain challenges.  Also on 27 April, US Secretary of the Treasury Janet Yellen met with WTO DG Dr. Okonjo-Iweala to discuss the global pandemic response, WTO reform, and prospects for the upcoming June MC12.

Ambassador Tai also met with Japanese Ambassador to the United States Koji Tomita on 27 April.  The Office of the United States Trade Representative (USTR) and the US Department of Labor also met with their counterparts in the Republic of Korea on 25 April for a meeting of the Labor Affairs Council, established as part of the United States-Korea Free Trade Agreement (KORUS).  Secretary Yellen met with Indonesia Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan to discuss an accelerated transition away from coal in Indonesia’s power sector as well as the potential for a Just Energy Transition Partnership (JETP).

On 21 April, Ambassador Tai met with Dutch Minister for Foreign Trade and Development Cooperation Liesje Schreinemacher.  She also met with officials from the Asia-Pacific region the week of 18 April, including from Singapore, and Chinese Taipei (“Taiwan”).  The US and Vietnam also convened their first meeting of the bilateral Timber Working Group to address illegal logging and timber trade.

This coming week, Ambassador Tai will travel later in the week to Ottawa to meet with Canadian Minister of International Trade, Export Promotion, Small Business and Economic Development Mary Ng.  The two are expected to discuss strengthening the relationship vis-à-vis the US-Mexico-Canada Agreement.

US Treasury Department officials also met with European officials and other global partners on the margins of the World Bank/International Monetary Fund (IMF) Spring Meetings in Washington the week of 18 April.  This included meetings with officials from Ukraine, Latvia, Lithuania, Estonia, the UK, the EC, Germany, Italy, Switzerland, Japan, Canada, Chile, Saudi Arabia, Iraq, Indonesia, South Africa, and the Democratic Republic of the Congo. The US also hosted an anti-corruption roundtable with non-governmental organizations; the US Government pledged $600.8 million over the next four years to support the eighth replenishment of the Global Environment Facility (GEF-8).  Secretary Yellen also participated at the Coalition of Finance Ministers for Climate Action on 19 April.

Also on 19 April, Secretary Yellen convened a meeting – “Tackling Food Insecurity – The Challenge and Call to Action” – which included the heads of the IMF, World Bank, and International Fund for Agricultural Development (IFAD), and the Finance Ministers of Indonesia and Germany representing the G20 and the G7, as well as lead technical experts on food security and agriculture at the International Financial Institutions (IFIs).  Her remarks at the event are available here.  That same day, the US Treasury Department released additional public guidance, titled, “Fact Sheet: Preserving Agricultural Trade, Access to Communication, and Other Support to Those Impacted by Russia’s War Against Ukraine.”

On 26 April, Secretary Yellen convened leaders of the multilateral development banks (MDBs) and ministries of finance and development that are shareholders of these development banks. The discussions focused on how to redouble efforts to increase infrastructure investment in low- and middle-income countries.

On 28 April, the US Government joined 60 global partners – including the EC and UK – in launching The Declaration for the Future of the Internet, recommitting to the vision of the global Internet as a platform for openness and innovation, while also promoting and protecting human rights.  A related White House fact sheet is available here.

On 21 April, the US Government joined Canada, Japan, the Republic of Korea, the Philippines, Singapore, and Taiwan in establishing the Global Cross-Border Privacy Rules (CBPR) Forum.  According to a Commerce Department summary,

The Global CBPR Forum intends to establish the Global Cross Border Privacy Rules (CBPR) and Privacy Recognition for Processors (PRP) Systems, first-of-their-kind data privacy certifications that help companies demonstrate compliance with internationally recognized data privacy standards.”

On 28 April, the US-EU Task Force on Energy Security met in-person in Washington to discuss implementation of the 25 March Joint Statement by President Biden and EC Commission President von der Leyen.  A White House readout reflected,

The sides also discussed the EU Energy Purchase Platform and plans to establish a framework to accelerate diversification of gas supply, including additional LNG supplies.”

Commerce held a US-EU Trade and Technology Council (TTC) US Stakeholder Roundtable on 19 April.  On 21 and 28 April, US Secretary of Commerce Gina Raimondo met in-person and then virtually with EC Executive Vice-President Margrethe Vestager to discuss their shared objectives in preparation for the upcoming US-EU TTC Ministerial taking place in France between 15-16 May.

Last week, the White House shared President Biden will welcome Italian Prime Minister Mario Draghi to the White House on 10 May 2022.  Apart from bilateral matters, the White House expects the two leaders will discuss the situation in Ukraine, European energy security, climate change, and preparations for the June Group of Seven (G7) and NATO Summits.

UK Developments

In a joint statement on 26 April, US and UK trade officials said they intend to develop in the coming weeks an “ambitious roadmap with economically meaningful outcomes” that addresses areas such as digital trade, labor and environmental standards, and support for small and medium-sized enterprises.  This announcement came at the conclusion of the second US-UK Dialogue on the Future of Atlantic Trade in Aberdeen, Scotland.  British Secretary of State Anne-Marie Trevelyan and US Ambassador Tai hosted a series of roundtable discussions with a diverse group of stakeholders from the US and UK business community, trade unions, and civil society.

On 28 April, Prime Minister Boris Johnson hosted Swiss President Ignazio Cassis for bilateral talks in London.  They announced a joint statement from the UK and Northern Ireland and the Swiss Confederation on enhancing bilateral relations.  The Department for International Trade also launched an eight-week consultation calling on businesses and the public for their views ahead of the start of bilateral negotiations for an enhanced trade agreement.

The week of 18 April, British Prime Minister Boris Johnson travelled to Gujarat and New Delhi, India.  On 22 April, he spoke of the situation in Ukraine, affirmed the UK’s support for the Indo-Pacific region, support for the new and expanded bilateral Defence and Security Partnership, and cooperation on energy security.  He also announced £1bn new commercial deals while in India.

On 19 April, UK Foreign Secretary Truss launched a new agreement with Indonesia – the ‘UK-Indonesia Roadmap’ – to boost bilateral trade, tech and security ties.  The UK has also offered of over £4 billion to finance long-term projects with British expertise; the relaunched British International Investment (BII) will enter the Southeast Asian market later this year.

EU Developments

EC President von der Leyen visited India on 24-25 April to advance the EU-India strategic partnership, discuss the global outlook, and the way forward to boosting the EU-India trade, technology and security cooperation.  In a statement issued after the visit, the Commission President stressed “the partnership with India is one of our most important relationships for the coming decade and strengthening this partnership is a priority”.  She also stressed the joint agreement with Indian Prime Minister Narendra Modi that will establish an EU-India Trade and Technology Council.  This will contribute to unleashing an untapped potential in trade, technology and security cooperation.  Notably, such potential will be realized through the negotiation of a comprehensive trade and investment agreement, with negotiations set to begin in June, according to Commission sources.

On 21 April, Executive Vice-President Valdis Dombrovskis visited Washington, D.C., to discuss an array of issues with Ambassador Tai, including the upcoming EU-US Trade and Technology Council and funding for Ukraine.  While the conclusions of the upcoming EU-US TTC are not final yet, it seems likely to include language about the commitment of the two partners to further isolate Russia from global supply chains.

After hours of negotiations, a political agreement was achieved in the morning hours of 23 April on a proposal for a Digital Services Act, the future digital content moderation law.  The EC welcomed the agreement on the far-reaching proposal, with President von der Leyen stressing:

Today’s agreement on the Digital Services Act is historic, both in terms of speed and of substance. The DSA will upgrade the ground-rules for all online services in the EU. It will ensure that the online environment remains a safe space, safeguarding freedom of expression and opportunities for digital businesses. It gives practical effect to the principle that what is illegal offline, should be illegal online. The greater the size, the greater the responsibilities of online platforms.”

The European Parliament’s International Trade Committee (INTA) discussed on 21 April the proposal for a Sustainable Corporate Due Diligence proposal at a Joint Hearing, where Members of Parliament perceived the proposal as underwhelming.  The Rapporteur of the legislative proposal, Lara Wolters (S&D, Netherlands), in particular noted it had become some sort of a ‘tick-box exercise’, suggesting instead that adopting a risk-based approach to due diligence would have been the right path forward.  With respect to the forced labour restrictions, while the EC initially considered incorporating them in the Sustainable Corporate Due Diligence proposal, it was ultimately decided to consider a separate proposal on this topic instead – a proposal that is anticipated to be published in September.

INTA unanimously agreed on 25 April on the Report related to the proposed EU foreign subsidies instrument, which will lower the thresholds for trigger the foreign subsidies investigations by the EC.  The proposal is expected to be formally endorsed in the May Plenary session.  The French Presidency also aims to reach a General Approach on the Foreign Subsidies proposal by 4 May.  Subject to both the Council’s agreement and the Parliament’s formal endorsement, the inter-institutional negotiations can commence with the aim to reach a common path for the future EU trade defence tool.

Meanwhile, the EC is expected to publish in June a communication outlining the action plan for how to integrate the trade and sustainable development review in EU Free Trade Agreements.  With regard to the new EU-US data agreement, Justice Commissioner Didier Reynders stressed his hopes an agreement would be within reach by the summer, which could ensure an agreement is finalised by the end of the year.

French President Emmanuel Macron was re-elected on 24 April, with 58.8 percent of votes.  His opponent, Marine Le Pen, received 41.2 percent of the votes.  In Slovenia, on 24 April, Prime Minister Janez Janša, was defeated by a newly created political party, the Freedom Movement, a green-liberal political party.

On 26 April, the EC issued guidance addressed to Member States asserting the coronavirus pandemic is no longer in an emergency phase in the EU. While there is no doubt that pandemic is not over, the pressures coming from hospitals led to the EC deciding to change the emergency status in the EU.

UK-EU Trade Deal Update

According to a Parliamentary inquiry, it appears UK Prime Minister Boris Johnson is contemplating new legislation that would impose new delays to post-Brexit customs controls.  These custom controls have been postponed in the past on multiple occasions.  In view of the ongoing conflict in Ukraine, the timetable of such a measure is likely to be carefully reviewed.

A new Report, published by a Changing Europe think tank, examines supply chains and pricing changes in the UK.  The Report clarifies that the EU-UK Trade and Cooperation Agreement has led to additional controls on goods going from the UK to the EU from 2021 as well as increased paperwork for traders.  Trade barriers were seen as contributing to a 6 percent increase in food prices between the end of 2019 and September 2021.