The President of the United States (US) focused this week on global transportation supply chains, namely two American ports on the West Coast of the country.  Similar to the US, the British Prime Minister is also focused on supply chain challenges, appointing a person to help advise on the issue.

The US also appears to be advancing its talks with some countries that have imposed digital services taxes (DSTs) that largely target American technology companies.  US Trade Representative Katherine Tai visited Italy and Switzerland this week for a series of meetings with foreign trade ministers on the margins of the Group of 20 (G20) Trade and Investment Ministerial, promoting a message about bolstering the World Trade Organization.

The European Commission (EC) presented some new proposals this week aimed at breaking the stalemate with the United Kingdom (UK) over the Northern Ireland Protocol and related disputes.  The EC also unveiled a proposal to amend the European Union (EU) Budget for 2021.

In this issue, we also cover:

• COVID-19 highlights among the transatlantic partners;

• The global tax agreement;

• Notable US, EU, and UK developments; and

• A brief UK-EU trade deal update.

COVID-19 Highlights

This week, the European Medicines Agency launched its rolling review of Evusheld, a combination of medicines developed by AstraZeneca, for the prevention of COVID-19 in adults.  On 12 October, German biotech CurVac announced it would stop its work on the mRNA COVID-19 vaccine, to develop instead a next-generation mRNA vaccine with GlaxoSmithKline.

The EC presented a proposal this week to amend the EU Budget for 2021 to support global vaccination and funding for global emergencies.  This includes a provision that would allow the EU to pay for an additional 200 million COVID-19 vaccines to be donated to countries in need.

At a White House meeting with Kenyan President Uhuru Kenyatta on Thursday, President Joe Biden announced the United States is donating an additional 17 million doses of the Johnson & Johnson (J&J) COVID-19 vaccine to the African Union (AU).  The US has already donated 50 million doses to the AU.

On Monday, Merck & Co. and Ridgeback Biotherapeutics requested emergency use authorization (EUA) from the Food and Drug Administration (FDA) for molnupiravir, a COVID-19 antiviral drug.  The FDA decision could come in a matter of weeks, with the FDA saying on Friday its advisory committee will meet on 30 November to discuss the EUA request. Separately, a FDA vaccine advisory panel on Thursday unanimously endorsed the use of Moderna’s COVID-19 booster shot for the elderly and younger people whose jobs, underlying health or other factors elevate their risk.  The FDA vaccine advisory panel also approved the J&J COVID-19 vaccine booster for all adult recipients of the initial J&J dose on Friday.  Meanwhile, a National Institutes of Health study published on Wednesday reflected the best booster for the J&J COVID-19 vaccine may be either the Pfizer/BioNTech or Moderna vaccines.

The White House announced last week that it would spend $1 billion to increase access to the COVID-19 home tests, with the ultimate goal of making 200 million available each month by the end of the year.  However, testing experts are warning it may not meet demand in the United States, which is expected to soar this fall and winter, as the Occupational Safety and Health Administration (OSHA) finalizes an emergency temporary standard (ETS) that would require companies with more than 100 workers to ensure any unvaccinated employees undergo testing at least weekly.

Late last Friday, the Centers for Disease Control and Prevention (CDC) said the US would accept international visitors inoculated with COVID-19 vaccines authorized by US regulators or the World Health Organization.  The CDC will release additional guidance and information as the travel requirements are finalized.  The United States is set to start admitting fully vaccinated air travelers on 8 November from the 26 Schengen countries in Europe,[1] as well as Britain, Ireland, China, India, South Africa, Iran and Brazil.

On Tuesday, the UK House of Commons Science and Technology Committee and Health and Social Care Committee published a 150-page report that reflected Britain’s COVID response was slow and “reactive.”  The inquiry concluded that some initiatives were examples of global best practice but others represented mistakes; added both must be reflected on to better inform future responses to emergencies.

Global Tax Agreement/Digital Services Taxes

On 8 October, parties agreed to the Organisation for Economic Co-operation and Development’s (OECD) Inclusive Framework, which will impose a global minimum corporate tax rate of 15 percent, effective 2023.  A detailed implementation plan was presented to ensure the ambitious deadline is met.  Further work will now continue on Pillar I of the Framework, dealing with the reallocation of profits, with the aim of concluding work next year.  Technical discussions are expected to focus on various outstanding issues, such as the compliance mechanism, the marketing and distribution profits safe harbor and the amendment of the double taxation conventions.  The G20 Finance Ministers and Central Bank Governors endorsed the landmark global tax agreement this week.

While the OECD framework includes provisions to eliminate unilateral digital services taxes (DST), the US has been focused on removing the unilateral DSTs ahead of retaliatory tariffs taking effect.  On Thursday, 14 October, French Finance Minister Bruno Le Maire shared the United States had reached an agreement with France, Italy and other European countries over withdrawing unilateral digital services taxes (DSTs).  The US Department of the Treasury has yet to release a statement on the agreement, but officials reportedly indicated details would be forthcoming.  Austria, France, Italy, Spain, the UK, India and Turkey have imposed DSTs on tech companies. Meanwhile, there remain questions about whether the US can ratify the OECD’s global agreement’s changes in how corporate profits are allocated for taxation, with Republicans saying it requires changes to tax treaties.

Notable US Developments

The US Federal Government was closed on Monday, in observance of the Columbus Day holiday.  Both chambers of the US Congress were scheduled to be in recess this week.  However, the House of Representatives reconvened on Tuesday to approve  S. 1301, a measure that temporarily extends the Treasury Department’s borrowing authority until at least 3 December, a date that coincides with the expiration of the short-term funding for the US Federal Government.

The White House announced on Thursday that President Biden will travel later this month to Italy, Vatican City and the UK.  On 29 October, he is scheduled to meet with Pope Francis later to discuss the COVID-19 pandemic, climate change and caring for the poor.  President Biden will attend the G20 Leaders Summit in Italy on 30-31 October, before travelling next to the UK to attend the World Leader Summit at the start of the 26th Conference of the Parties to the UN Framework Convention on Climate Change (COP26) in Scotland on 1-2 November.

President Biden focused on global transportation supply chain challenges on Thursday, meeting with senior officials and stakeholders to discuss collective efforts to address supply chain bottlenecks.  In remarks to the media, he announced the Port of Los Angeles was joining the Port of Long Beach in committing to operating 24 hours a day, 7 days a week, to help eliminate some of the trade blockages.  The International Longshore and Warehouse Union (ILWU) announced its members are willing to work the extra shifts to help clear existing backlogs.  These two ports account for 40 percent of containers transiting to the United States.

President Biden also shared large companies – such as FedEx, UPS, The Home Depot, Walmart, Target and Samsung – would also use expanded hours to help move more cargo off the dock.  These announcements are intended to signal to other businesses along the US transportation supply chain – railways, trucking, and warehouses – that there is demand to move additional cargo at off-peak hours, with the White House pushing to harmonize a 24/7 schedule for the American transportation supply chain.  Meanwhile, officials in Washington have begun warning American citizens that Christmas holiday gifts may be delayed, due to supply chain disruptions.

The US appears to be on track to reach a deal with the EU on Section 232 steel and aluminum tariffs by the end of the month.  Bloomberg reported this week that the Biden Administration has proposed a tariff rate quota system that would allow for larger quantities of steel imports as a potential resolution to the dispute.  US Trade Representative Katherine Tai met this week with EC Executive Vice President and Trade Commissioner Valdis Dombrovskis to discuss a range of issues including “the ongoing efforts to address global overcapacity in the steel and aluminum sectors and shared challenges posed by non-market economies.”

Notable EU Developments

A Joint EU-US Statement was released on 11 October on the Global Methane Pledge, following a virtual Ministerial meeting.  Ahead of the COP26, political support has been growing, with 24 additional counties committing to join the pledge.

On Monday, 11 October, the EC decided to suspend, for nine months, its definitive anti-dumping duties for Chinese flat-rolled aluminum imports.  The temporary suspension was granted because of market condition changes linked to post-pandemic demand.  The EC will continue to monitor the import volumes to ensure the temporary suspension does not damage the bloc’s industry.  The European Aluminum industry criticized the move and is currently considering taking legal actions against the European Commission.

The Council of the EU decided this week to extend sanctions for another year against the proliferation and use of chemical weapons, through to 16 October 2022.  The restrictions, targeting 15 persons and 2 entities, include a travel ban to the EU and asset freeze.  In connection to Ukraine’s territorial integrity, sanctions were also imposed this week against eight law enforcement officials involved in enforcing Russian law in the illegally annexed Crimea territory and the city of Sevastopol, bringing a total of 185 persons and 48 entities on the EU’s sanctions list.

Notable UK Developments

On 8 October, Prime Minister Johnson appointed Sir David Lewis, former CEO of Tesco, as the UK Government’s Supply Chain Adviser.  Sir Lewis will advise the Prime Minister on immediate improvements and any necessary long-term changes to UK supply chains for goods, and will work with British Government officials to resolve acute, short-term issues.  He will also co-chair the new Supply Chain Advisory Group, consisting of external experts in the field, and the new Industry Taskforce.

On Friday, 15 October, the UK Government reported that more than £5.8 billion of foreign investment in green projects has been secured since the launch of Prime Minister Boris Johnson’s Ten Point Plan.  Next week, London will host the Global Investment Summit (19 October), which will further showcase UK green business and innovation opportunities.

Also this week, UK International Trade Secretary Anne-Marie Trevelyan announced the start of discussions with Italy on a new export and investment partnership aimed at boosting trade between the two countries.  The talks will promote inward investment, including in low-carbon industries such as onshore and offshore wind, hydrogen, and carbon capture storage, plus the food and drink industry and tech sector.

UK-EU Trade Deal Updates

The EU-UK relationship was tested again this week, as the two sides sought to bridge divergent views on the implementation of the Northern Ireland Protocol.  The European Union remains firm against the UK’s insistence on renegotiating the Protocol and removing the role of the European Court of Justice.

The EC presented a new package of proposals this week aimed at solving the trade impasse and governance difficulties with respect to implementing the Northern Ireland Protocol (further information on the package is accessible here).  EC Vice President (VP) Maroš Šefčovič noted the package proposes “creative, practical solutions, designed to help Northern Ireland deal with the consequences of Brexit”.  VP Šefčovič reiterated the EU’s unwavering commitment to maintain the peace and stability provided by the Good Friday Agreement. He said the Bloc is “proposing an alternative model for the implementation of the Protocol”; he added,

On the one hand, the flow of goods between Great Britain and Northern Ireland will be facilitated for goods that are to stay in Northern Ireland. On the other, robust safeguards and monitoring mechanisms should be put in place to make sure they stay in Northern Ireland.”

UK Cabinet Minister and Brexit negotiator David Frost is expected to travel on Friday to Brussels for a lunch meeting with his counterpart VP Maroš Šefčovič to discuss the Northern Ireland Protocol proposals.

[1] Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and Switzerland.