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Transatlantic Trade: US and European Trade Talk Update – July 20, 2020
Monday, July 20, 2020

The European Union’s (EU) Foreign Affairs Council met this past week and focused on concerns with respect to the Eastern Mediterranean, Libya and Hong Kong.  This week’s report provides a readout of some of these discussions, as well as the United States’ (US) perspective on the Eastern Mediterranean region and Libya.  The United Kingdom (UK) also moved to further restrict Huawei Corporation’s equipment and services from being integrated into its growing 5G network, a move the United States welcomed warmly.  Meanwhile, the US Government imposed additional restrictions on Chinese technology companies this week on the basis of human rights concerns and the situation in Hong Kong Special Administrative Region (Hong Kong) of the People’s Republic of China (China or PRC).

Highlights of EU-Readout of Foreign Ministers Statement

On the 13 July 2020, the EU’s Foreign Affairs Council met to discuss a number of pressing issues including the situation in the Eastern Mediterranean and the situation in Hong Kong.  In a statement of the EU Foreign Ministers regarding the Eastern Mediterranean, from May 2020 and in line with previous Council conclusions, the EU reaffirmed that it stands in “full solidarity with Cyprus and reiterates that concrete steps towards creating an environment conducive to dialogue are needed.”  The EU also welcomed the invitation from the Government of Cyprus to Turkey to negotiate in good faith the maritime delimitation between their respective coasts.  However, the EU believes Turkey’s actions have not been helpful and that it has failed to respond to calls to cease activities in violation of international law and the sovereignty of Cyprus.

The Foreign Affairs Council meeting also highlighted the consensus of Member States that the EU-Turkey relations are strained due to “worrying developments affecting the EU’s interests in particular in the Eastern Mediterranean and Libya.”  In connection to the Turkish drilling activities, Foreign Ministers reiterated the EU’s repeated calls to Turkey to cease the illegal activities in the Eastern Mediterranean.  The conclusion notes the suspension of the EU negotiations on the Comprehensive Air Transport Agreement with Turkey and the temporary cancelation of the EU-Turkey Association Council (bilateral EU-Turkey meetings for accession discussions) and EU-Turkey high-level meetings.  

The Foreign Ministers also condemned the recent decision of Turkey to convert a monument in UNESCO’s World Heritage List, Hagia Sophia, back to a mosque, despite global criticism of this decision.  This decision, which is unlikely to be reversed by Turkish President Recep Tayyip Erdoğan, could further undermine the already strained relations between the EU and Turkey.

Beijing’s passing of a new national law on security with respect to Hong Kong was also a key topic of discussion among the Foreign Ministers.  The EU reiterated its support for the autonomy and freedom of the people of Hong Kong and underlined the impact any action taken would have on the EU’s relationship with China.  In June, the European Parliament passed a resolution condemning the law, however, European leaders have overall been less forthcoming about whether they will grant asylum to those fleeing the area.  So far, the United Kingdom is the only country to state publicly that it would grant asylum requests.

Germany has also expressed openness to the possibility of accepting asylees from Hong Kong.  German Chancellor Angela Merkel recently stated Germany “will continue to pursue dialogue with China in all areas: On human rights, on social questions, but also on investor protection, reciprocal trade relations and climate protection, because without China we won’t be able to halt climate change.”  To date, Germany has already granted asylum to two Hong Kong activists namely Ray Wong and Alan Li, which was kept quiet in an attempt to preserve relations between Germany and China.

US Position | Eastern Mediterranean, Libya, & Hong Kong

The United States also continues to closely monitor and weigh-in on situations in the Eastern Mediterranean region.  On 1 July, the US Department of State issued a statement on the change in status of the Hagia Sophia, urging the Government of Turkey to continue to maintain it as a museum.  State also noted:

The United States views a change in the status of the Hagia Sophia as diminishing the legacy of this remarkable building and its unsurpassed ability—so rare in the modern world—to serve humanity as a much-needed bridge between those of differing faith traditions and cultures.”

The US Embassy in Cyprus turned to Twitter recently to announce a new military-to-military cooperation.  “We’re strengthening our security partnership with the Republic of #Cyprus by providing International Military Education and Training [IMET]. The IMET program promotes regional stability & defense capabilities through professional military education and training.”  IMET is a key component of US security assistance, promoting regional stability and defense capabilities through professional military education and training.  This action aligns with the Eastern Mediterranean Security and Energy Partnership Act of 2019, which authorized new US security assistance for Cyprus and Greece and lifts a US arms embargo on Cyprus.  The law also authorized the establishment of a US-Eastern Mediterranean Energy Center to facilitate energy cooperation among the United States, Greece, Cyprus and Israel.  The US Government has yet to announce a lifting of the US arms embargo on Cyprus.

Meanwhile, the United States continues to oppose all foreign military interventions in Libya, noting concern with the proxy war underway in the oil-rich nation.  This includes Turkey sending mercenary fighters to help the Government of National Accord (GNA), while Egypt and others, such as Russia via surrogate groups, backing the Libyan National Army (LNA) commanded by Gen. Khalifa Haftar.  The State Department continues to issue statements and hold briefings that also highlight concerns of possible United Nations arms embargo violations.

Last week, the US Government took steps in response to the situation in Hong Kong.  On Tuesday, 14 July, President Donald Trump signed the Hong Kong Autonomy Act into law.  In an accompanying signing statement, he noted, the law “addresses China’s failure to meet certain obligations under the Sino-British Joint Declaration.”  That same day, President Trump also signed an Executive Order on Hong Kong Normalization, directing US departments and agencies to suspend or eliminate different and preferential treatment for Hong Kong, among other things.

UK-US Developments

Also on 14 July, the UK Government decided to ban Huawei from its 5G networks.  The Government will ban the purchase of new 5G equipment from Huawei in January 2021, and will compel telecommunications operators to “rip and replace” existing equipment by 2027.  Although the UK Government attributes this change of policy to the effect of US sanctions on the reliability of Huawei equipment, Prime Minister Boris Johnson’s decision comes after intense American pressure, and marks a reversal of allowing Huawei to participate in limited sectors of the economy, in line with other European countries’ policies.  Other European countries have faced calls to step up their approach to the Chinese telecommunications company.  Belgium took a similar position in June and the Netherlands announced a ban from “core” parts of the network in 2019.  Countries such as Germany, Poland, Italy and Spain are overhauling their telecommunications security laws.

The United States welcomed the UK’s new approach to Huawei, particularly since it has been warning NATO members against allowing Huawei into its 5G networks before the pandemic and especially since the COVID-19 outbreak.  US Secretary of State Mike Pompeo and UK Foreign Secretary Dominic Raab discussed “the UK’s decision to prevent the use of unsecure technology in its 5G networks” on Thursday, 16 July.  A State Department readout of the call also reflected the two sides “agreed to work together to promote the development of additional trusted 5G solutions.”  Meanwhile, the United States announced it was “imposing visa restrictions on certain employees of Chinese technology companies that provide material support to regimes engaging in human rights abuses globally,” on Wednesday, 15 July.  Huawei was among the Chinese companies affected by this latest move.

With the UK determined to strike a trade deal with the United States, there have been reports that the Trump Administration may seek a deal with the UK that includes a provision that would allow the US to reject any trade deal the UK has with a country that is classified by the US as having a non-market economy, such as China – the US secured a similar clause in the US-Mexico-Canada Agreement (USMCA) trade deal.  Despite the apparent 5G cooperation, there continue to be a number of points of contention between the two sides in trade negotiations.  This includes differing opinions on health and safety standards in food and a number of other politically sensitive issues.

Secretary Pompeo will travel to the UK and Denmark this week, from 20-22 July.  In London, he will meet with Prime Minister Johnson and Foreign Secretary Raab “to discuss global priorities, including the COVID-19 economic recovery plans, issues related to the People’s Republic of China (P.R.C.) and Hong Kong, and the U.S.-U.K. Free Trade Agreement negotiations.”  The Secretary’s stop in Denmark on 22 July will focus on the pandemic, China, and possibly increasing cooperation “in key areas of mutual concern.”

US-EU Developments

On Wednesday, 15 July, the United States revised guidance for an existing sanctions regime, laying the groundwork for future sanctions on those companies involved in the construction of the Nord Stream 2 gas pipeline.  The Department of State updated its guidance for the Countering America’s Adversaries Through Sanctions Act (CAATSA) to include Russian-backed gas line infrastructure projects, specifically Nord Stream 2 and the second line of TurkStream.  The United States maintains its belief that these pipelines would allow Russia to exert a dangerous level of control over Europe’s access to energy, including Ukraine.  While acknowledging it continues to work with allies, the State Department noted:

We encourage companies to reassess their participation in Russian energy export pipelines subject to Section 232, and to take appropriate steps to mitigate their exposure to sanctions, pursuant to this updated guidance.”

EU High Representative for Foreign Affairs and Security Policy Josep Borrell continues to reject “the extraterritorial application of U.S. sanctions”, deeming it as contrary to international law.  In a statement in response to a question posed by MEP Emmanuel Maurel, Borrell reiterated the possibility of applying retaliatory sanctions for any US actions against the Nord Stream 2 gas project.

This past week, the European Court of Justice (ECJ) struck down the EU-US Privacy Shield, an agreement governing the transfer of EU citizens’ data to the United States.  The ECJ noted“The limitations on the protection of personal data arising from the domestic law of the United States… are not circumscribed in a way that satisfies requirement.”  US Secretary of Commerce Wilbur Ross expressed deep disappointment over the decision, noting the Commerce Department hopes to “limit the negative consequences to the $7.1 trillion transatlantic economic relationship.” According to the University College London’s European Institute, the agreement underpinned transatlantic digital trade for approximately 5,300 companies.

EU-UK Talks

UK Prime Minister Johnson met via videoconference with President of the European Council Charles Michel, European Commission President Ursula von der Leyen, and European Parliament President David Sassoli on 15 July to take stock of progress on negotiations for its future relationship.  While they acknowledged the four rounds of talks, despite the pandemic, had clarified respective positions, the parties agreed new momentum is required.  Readout from 10 Downing Street further reflected, “They supported the plans agreed by Chief Negotiators to intensify the talks in July and to create the most conducive conditions for concluding and ratifying a deal before the end of 2020. This should include, if possible, finding an early understanding on the principles underlying any agreement.”  The parties also acknowledged the UK’s decision not to request any extension to the transition period, which means the transition period will end on 31 December, in accordance with the Withdrawal Agreement.

On Friday, a fifth round of talks was announced for 20-23 July.  An agenda for the talks is available here.

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