With the mid-term elections approaching (November) in the United States (US), the White House and those Members of Congress up for re-election (the full House of Representatives and one-third of the Senate) continue to focus domestic matters of concern for American voters – namely the US economy, high gas prices, and an inflation rate that is the highest in 40 years.  The US President continues to focus on the Russia-Ukraine conflict, citing it as a significant driver of higher gas prices and inflation, while also exploring options for addressing the higher costs facing Americans. 

Over the past two weeks, the US continued to discuss European Energy Security with the European Union (EU); some Senators introduced a bill seeking to advance the US-United Kingdom (UK) trade negotiations.  Meanwhile, the EU’s proposals on an Emission Trading Systems (ETS) and the Carbon Border Adjustment Mechanism (CBAM) appear to be moving forward again, after being rejected a few weeks ago.  Additionally, the UK announced new free trade talks with Gulf Cooperation Council, along with some new investment initiatives related to Commonwealth countries, including those in Africa.

Looking ahead, Germany is set to host the Group of Seven (G7) Leaders’ Summit at Schloss Elmau, from 26-28 June; Spain is set to host the 2022 North Atlantic Treaty Organization (NATO) Summit in Madrid, from 28-30 June.  The US President is set to attend both Summits; he will deliver taped remarks at the 2022 SelectUSA Investment Summit, held in the Washington D.C. metropolitan area from 26-29 June, a forum that highlights investments and opportunities in the United States.

In this issue, we cover:

• Ukraine and Russia, and transatlantic responses;

• A synopsis of the twelfth WTO Ministerial meeting;

• Notable US, UK, and EU developments; and

• A brief UK-EU trade deal update.

Ukraine-Russia | Western Allies Continued Collaboration

On 17 June, the Financial Action Task Force (FATF)[1] concluded the last Plenary under the German Presidency and produced policy recommendations to strengthen efforts to combat corruption and the misuse of virtual assets.  The FATF also took action to restrict the Russia’s FATF membership privileges. 

On 17 June, British Prime Minister Boris Johnson met with Ukraine President Volodymyr Zelenskyy in Kyiv.  He offered to launch a major training operation for Ukrainian forces, with the potential to train up to 10,000 soldiers every 120 days.  If accepted, the UK would spearhead the training programme, while other willing international partners would host it.

The day before, the UK Government announced new sanctions focused on Russia, including on the Russian Children’s Rights Commissioner, Russian military officials, and members of the so-called ‘Salvation Committee for Peace and Order’, among others.  The UK announcement also include other sanctions related to the situation in Myanmar. 

The US-EU Task Force on European Energy Security met virtually on 22 June 22 to review progress since the 25 March Joint Statement by US President Joe Biden and European Commission President Ursula von der Leyen and to chart next steps.  Amid a move away from reduced Russian gas supplies, on 19 June, German Economy Minister Robert Habeck, who is a Green Party politician in the center-left ruling coalition, announced a return to “coal-fired power plants for a transitional period” in order to reduce gas consumption for electricity production.

Twelfth WTO Ministerial Meeting

The World Trade Organization (WTO) 12th Ministerial Conference (MC12) took place between 12-17 June in Geneva, Switzerland.  The MC12 agreed on a wide package of WTO response to emergencies, including:

• A Ministerial Declaration on the Emergency Response to Food Insecurity;

• A Ministerial Decision on World Food Programme (WFP) Food Purchases Exemptions from Export Prohibitions or Restrictions;

• A Ministerial Declaration on the WTO Response to the COVID-19 Pandemic and Preparedness for Future Pandemics; and

• A Ministerial Decision on the Agreement on Trade-related Aspects of Intellectual Property Rights.

Similarly, MC12 participants endorsed a Decision on the E-commerce Moratorium and an Agreement on Fisheries Subsidies.   A document outlining the outcome of the MC12 acknowledges reform needs, stating necessary steps must be taken to “ensure the WTO’s proper functioning.”  There is also a commitment to establish a “fully and well-functioning dispute settlement system accessible to all Members by 2024.”

The Declaration on the COVID-19 Pandemic and Preparedness for Future Pandemics concludes a long-debated issue at the WTO over a waiver from the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) for COVID-19 vaccines.  While the agreement reached is considered a big win for developing countries – authorizing the intellectual property (IP) waiver of generic versions of COVID-19 vaccines – pharmaceutical and manufacturing industries were less than pleased with the outcome, warning it will negatively affect competitiveness and innovation.  European Commission Executive Vice-President Valdis Dombrovskis stated, “The agreed solution at the same time maintains a functioning intellectual property framework with incentives for investment, research and transfer of technology.” 

British International Trade Secretary Anne-Marie Trevelyn issued a statement at the conclusion of MC12.  With respect to the TRIPs waiver debate and conclusion, she said:  “Coming into discussions about the WTO’s response to the pandemic, we were clear that the solution to the access of Covid-critical goods lay beyond Intellectual Property, such as principles in applying export restrictions, increased transparency supporting trade facilitation and tariff reduction.  . . .   Let me be clear: this is not about waiving IP rights. This decision should make it easier for developing countries to export the vaccines they produce within existing flexibilities.” 

Meanwhile, the Pharmaceutical Research and Manufacturers of America (PhRMA) issued a statement criticizing the MC12’s IP (TRIPs) waiver focus instead of resolving the pandemic-related challenges associated with supply chain bottlenecks and border tariffs on medicines.  PhRMA stated:  “Rather than resolving these issues, diplomats spent the past year and a half arguing at the World Trade Organization over ways to undermine the very intellectual property rights that enabled hundreds of collaborations to produce the COVID-19 vaccines on a global scale.  We are severely disappointed that the Biden administration helped lead this charge and gave away valuable American technologies to foreign competitors, undermining the millions of American jobs supported by our industry.”

The Council of the EU endorsed two sets of conclusions through the MC12, approving the Decision on the WFP and Trade-related aspects of Intellectual Property Rights.

US Developments

As American frustration increases over high gas prices and the Biden Administration is considering options to address this challenge and record high inflation in the country, US refiners reportedly met with White House officials on 23 June, urging them not to ban US fuel exports to combat record gas prices.  Among other reasons, US refiners argue that such a move could potentially anger allies.  According to Federal Government data, the United States is the world’s biggest exporter of refined products, lately shipping a near-record of 6 million barrels per day of products including gasoline and diesel.  Mexico, Canada and Japan are among the top buyers of US refined products; Europe has increased purchases in recent weeks to make up for lost Russian supply.  US refiners instead favor short-term options to lower gas prices, such as waiving summertime fuel specifications designed to reduce smog, relaxing shipping rules requiring union labor and approving new renewable fuel technology. 

On Wednesday, 22 June, President Biden called for the US Congress to pass a three-month pause on the federal 18-cent-per-gallon levy, casting the proposal as a temporary measure that would provide relief to Americans without harming the road-building projects the tax traditionally funds.  (White House fact sheet available here.)  The President’s proposed gas tax holiday, however, has met with skepticism from senior Democrats in the House.  “I’ve not been a proponent of the gas tax,” House Majority Leader Steny Hoyer (D-Maryland) said in a brief interview on Tuesday night.  He added, “I just don’t know that it gives much relief.” 

Separately, US Trade Representative Katherine Tai testified before US lawmakers on 22 June, saying that a decision on whether to lift Section 301 tariffs on Chinese goods, as a way to ease inflation in the US, remains undecided at the highest levels of the Biden Administration.  “I would direct you to the President’s comments over the weekend, that with respect to China tariffs and next steps on actions, that they are pending with him right now,” Ambassador Tai said, referencing President Biden’s statement over the weekend that he is “in the process” of deciding what to do on tariffs (Link to an article recapping the President’s remarks).  “These are issues under consideration for decision right now.”

On 15 June, the Biden Administration provided US lawmakers with an update on the status of negotiations with Iran, as it seeks to revitalize the 2015 Joint Comprehensive Plan of Action (JCPOA) that the Trump Administration unilaterally withdrew the United States from in 2018.  In January, the Biden Administration indicated they had tabled a proposal and were on the cusp of restoring the agreement with Iran; however, months later, Tehran has yet to accept it.  Senate Foreign Relations Committee (SFRC) Chairman Robert Menendez (D-New Jersey) told the media recently, “I’m not optimistic there will be such a deal.  The administration believes that strategically it makes sense to keep the offer on the table, but I don’t see the pathway forward.  That’s my own view.”   SFRC Ranking Member James Risch (R-Idaho) said after the briefing, “I do know where the negotiations stand and they should’ve been over. They [the Biden Administration] promised us it was going to end in February if there wasn’t a deal.”  Meanwhile, Iran’s oil exports have doubled since August.  Earlier this month, Iran turned off two surveillance cameras used by the UN’s International Atomic Energy Agency to monitor one of its nuclear facilities – a move that US lawmakers have said is just one more sign that Iran does not want to cooperate with Western allies on oversight of its nuclear program.

With the August recess fast approaching, the US Congress continues to negotiate over a compromise on the Bipartisan Innovation Act, seeking to reconcile differences between the House-passed America COMPETES bill and the Senate-approved US Innovation and Competition Act, USICA).  Reports indicate the trade titles in the bills are holding up the talks, with some Senators suggesting this week that these provisions could be dropped in order to advance a measure that funds the US semiconductor industry ($52 billion).  These Senators also warned that semiconductor companies might pull back from previously announced investments in the United States, if Congress does not approve a reconciled measure before they recess at the end of July. 

On 22 June, Senators Rob Portman (R-Ohio) and Chris Coons (D-Delaware) – co-founders and co-chairs of the Senate UK Trade Caucus – introduced a bill that would give the US President five years of “fast-track” authority to strike a comprehensive trade deal with the United Kingdom.  The Securing Privileged Economic, Commercial, Investment, And Legal Rights to Ensure Longstanding Atlantic Trade and Investment Opportunities and Nurture Security, Happiness, Innovation, and Prosperity Act (the “SPECIAL RELATIONSHIP Act”) encourages the Executive Branch to build on the US-Mexico-Canada Agreement standards in negotiations with the UK.  The SPECIAL RELATIONSHIP Act also emphasizes that any US-UK trade agreement must uphold peace and stability in Ireland and Northern Ireland. 

Deputy Agriculture Secretary Jewel Bronaugh was in London this past week (22-24 June) on a trade mission that brought together representatives of US farm organizations, agribusinesses and state agriculture departments with UK customers.  This trip came after the UK signed a trade deal with Indiana last month, where the agreement is viewed as the first of several with individual US states, as the UK waits for the US to resume free trade agreement talks. 

Meanwhile, Deputy US Trade Representative Jayme White and UK Trade Commissioner for North America Emma Wade-Smith opened the 5th US-UK Small and Medium-Sized Enterprise (SME) Dialogue in Boston, Massachusetts.  A readout from the Office of the US Trade Representative (USTR) reflected:  “The discussion focused on opportunities for U.S.-UK SME trade and cooperation in emerging technologies; best practices for U.S. and UK companies; access to capital for SMEs; and trade resources for small businesses.” 

UK Developments

On 24 June, the UK committed to providing an additional £372 million to those countries most impacted by rising global food prices.  The UK is also working with allies to address challenges associated with Ukraine’s grain exports that is affecting global supply chains.  Prime Minister Johnson added that he is committed to examining the UK’s own demands on land and use of biofuel ahead of the G7 Summit, since the use of grain for biofuel is contributing to reduced availability and increased costs for human consumption.

In Kigali on 23 June for the Commonwealth Business Forum hosted by Rwanda, Prime Minister Johnson welcomed new UK investments and public-private partnerships that are helping to expedite the clean energy transition in Africa.  Among other investments, British International Investment will provide up to £162 million (USD $200m) of capital investment in the hydropower sector in Africa, partnered with Norway’s Norfund in a joint venture with energy firm Scatec.  The Prime Minister also announced new trade and investment initiatives to create jobs, growth and shared prosperity across the Commonwealth.  This includes plans for a Developing Countries Trading Scheme, along with new Platinum Partnership trade alliances and financial Centres of Expertise.  Meanwhile, John Humphrey was appointed as Her Majesty’s Trade Commissioner (HMTC) to Africa.  Additionally, Sarah Montgomery, Officer of the Order of the British Empire (OBE), was appointed UK Special Envoy to the Horn of Africa and Red Sea. 

On 22 June, British Trade Secretary Anne-Marie Trevelyan launched free trade agreement (FTA) negotiations between the UK and the Gulf Cooperation Council (GCC), which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE).  Talks kicked off in Riyadh on a potential trade deal that includes £33.1 billion of trade.  This marks the fourth major set of FTA negotiations launched by the Trade Secretary this year. 

On 21 June, the UK and Thailand held the first Joint Economic and Trade Committee (JETCO).  JETCO offers an opportunity to improve bilateral trade, including by addressing trade barriers affecting business activity in both countries.  The participating Ministers established a trade cooperation working group, to build on the work of the recently completed Joint Trade Review, by identifying and resolving barriers to trade and promoting policy and trade cooperation projects.

The week of 13 June, Prime Minister Johnson welcomed attendees to London Tech Week, where he reiterated the UK Government remains committed to producing the best results in tech, investing £22billion into research and development.  This includes partnering with international partners, while also seeking to further attract new talent to the country.  Amid Tech Week, the new UK-Singapore Digital Economy Agreement entered into force on 14 June, deepening ties between Asia and the UK on tech and digital trade.  Shortly after Tech Week, American tech firm Credera announced it would invest £45 million into Manchester and Newcastle, creating over 300 jobs in the UK. 

EU Developments

On 22 June, the European Commission endorsed a Communication outlining the long anticipated review of the Trade and Sustainable Development, which will address the EU’s expectations with respect to sustainability, labor and social rights in trade agreements.  The new approach aims to include a more results-oriented and priority-based engagement with partner countries, while envisioning more participation and support from civil society.  It also aims to put a stronger emphasis on implementation and enforcement.

Regarding ongoing EU policy files, the European Parliament has been discussing the Anti-Coercion Tool, at both the International Trade and the Foreign Affairs Committees the past two weeks.  While there is general support for the measure, there are still negotiations ahead of the anticipated early October vote at the Committee level.  

Meanwhile, after the rejection of the Emission Trading Systems (ETS) and the Carbon Border Adjustment Mechanism (CBAM) proposals a couple of weeks ago, the European Parliament’s plenary finally endorsed the proposals on 22 June.  The three main political parties secured a compromise to phase out of free ETS permits between 2027 and 2032.   With the incoming Czech Presidency taking over on 1 July, the interinstitutional negotiations are expected to begin that month.

The Council and European Parliament reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD) on 22 June.  The landmark piece of legislation will bring new Environmental, Social and Governance (ESG) reporting obligations to all large companies, their subsidiaries, listed companies and listed small- and medium-sized enterprises (SMEs), as well as non-EU companies generating up to 150 million EUR net turnover in the EU.  The legislative file still needs to go through procedural steps before it can become official EU law, which is expected in the coming months.

UK-EU Trade Deal Update

On 13 June 2022, the UK government introduced the anticipated controversial legislation seeking to override parts of the Northern Ireland (NI) Protocol.  The bill introduces four areas of intervention: 

• Removing unnecessary costs and paperwork for businesses trading within the UK, while ensuring full checks are done for goods entering the EU;

• Offering businesses a choice to place goods on the market in NI in accordance with either UK or EU goods rules;

• Ensuring NI can benefit from the same tax breaks and spending policies as the rest of the UK, including VAT cuts on energy-saving materials and COVID-19 recovery loans; and

• Removing the role of the European Court of Justice and proposing independent arbitration to settle disputes.

In response, on 15 June, the European Commission announced its decision to re-open the NI Protocol infringement proceedings, which had been paused as talks appeared to progress, and opened two new proceedings.  European Commission Vice-President, Maroš Šefčovič stated that violating international agreements is not acceptable, which prompted the EU to proceed with this decision.  He stressed:  “The EU and the UK must work together to address the practical problems that the Protocol creates in Northern Ireland due to Brexit.  I am still convinced that with genuine political will to make the Protocol work, we can reach our objectives.  I call on my UK counterparts to engage in good faith and explore the full potential of the solutions we have put forward.  Only joint solutions will create the legal certainty that people and businesses in Northern Ireland deserve.”  Meanwhile, the European Commission published a number of position papers on customs and sanitary and phytosanitary (SPS) rules, which contain further details from the October 2021 proposals.

“The EU and the UK must work together to address the practical problems that the Protocol creates in Northern Ireland due to Brexit.  I am still convinced that with genuine political will to make the Protocol work, we can reach our objectives.  I call on my UK counterparts to engage in good faith and explore the full potential of the solutions we have put forward.  Only joint solutions will create the legal certainty that people and businesses in Northern Ireland deserve.”