The past two weeks saw the conclusion of the Group of Seven (G7) Leaders and North Atlantic Treaty Organization (NATO) Summits in Germany and Spain, respectively. The G7 Leaders’ issued a Communique affirming continued solidarity with Ukraine. Aligning with the G7, the United States (US) started its domestic process to impose tariffs on a number of goods from the Russian Federation (Russia). Separately, US lawmakers appear to have stalled on advancing legislation that includes domestic semiconductor chip incentives.
Meanwhile, the European Union concluded a free trade agreement (FTA) with New Zealand; forward momentum continues in the bloc on proposals that would address foreign subsidies and deforestation. The United Kingdom (UK) saw political upheaval this week that culminated in the resignation of British Prime Minister Boris Johnson, which some believe may help change the narrative in talks between the UK and EU over the Northern Ireland Proposal.
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 Continued Collaboration
The Leaders of the G7 Leaders endorsed a statement on 27 June reaffirming their support for Ukraine, attributing increased threats to global food security to the ongoing Russia-Ukraine conflict. G7 Leaders also noted their readiness to align and expand targeted sanctions against Russia, seeking to “further restrict Russia’s access to key industrial inputs, services, and technologies produced by our economies, particularly those supporting Russia’s armament industrial base and technology sector.” The White House released a fact sheet related to the G7’s actions in support of Ukraine.
The G7 Leaders Summit concluded with a Communiqué that highlighted the agreement on other priorities, such as reducing global greenhouse gas emissions by around 43 per cent by 2030 (from 2019 figures) and continued efforts to phase out Russian oil from their respective markets. With respect to the latter matter, the Communiqué welcomed the “decision of the European Union to explore with international partners ways to curb rising energy prices, including the feasibility of introducing temporary import price caps where appropriate.”
US Trade Representative Katherine Tai welcomed the new G7 sanctions commitments. With respect to US President Joe Biden’s proclamation announcing tariffs on Russian goods, she said, “We look forward to working with Congress to enact legislation that will allow the proceeds of the tariffs we are raising today to be used to help Ukraine. This will send an important message to Russia that it will have to pay for the costs of its war.” A higher tariff rate on more than 570 groups of Russian products, worth approximately $2.3 billion to Russia, includes the following products and categories: steel and aluminum; minerals, ores, and metals; chemicals; arms and ammunition; wood and paper products; aircraft & parts; and automotive parts. The Federal Register notice on Increased Duties on Certain Imported Articles is available here.
We look forward to working with Congress to enact legislation that will allow the proceeds of the tariffs we are raising today to be used to help Ukraine. This will send an important message to Russia that it will have to pay for the costs of its war.
On 29 June, the Russian Elites, Proxies, and Oligarchs (REPO) Task Force issued a statement reflecting it “has leveraged extensive multilateral coordination to block or freeze more than $30 billion worth of sanctioned Russians’ assets, freeze or seize sanctioned persons’ high-value goods, and heavily restrict sanctioned Russians’ access to the international financial system.” The statement further noted, “In the coming months, REPO members will continue to track Russian sanctioned assets and prevent sanctioned Russians from undermining the measures that REPO members have jointly imposed.”
The UK Government announced new sanctions targeting Russian President Vladimir Putin’s inner circle on 29 June. Those individuals and entities sanctioned included: Vladimir Potanin, owner of Interros, a major conglomerate; Anna Tsivileva, Putin’s first cousin one removed and president of JSC Kolmar Group; Sergey Tsivilev, Governor of the Kemerovo region and husband to Anna Tsivileva; and JSC Kolmar Group.
The White House released some fact sheets related to the G7 Summit addressing: (1) the global food security crisis, (2) strengthening cooperation to address economic issues, cyberspace and quantum, and (3) efforts to address accountability with respect to the Russia-Ukraine conflict. In Germany on 26 June, President Biden officially launched the Partnership for Global Infrastructure and Investment (Memorandum; White House fact sheet). G7 leaders also agreed to study possible price caps on Russian oil and gas to try to limit Moscow’s ability to fund its activities in Ukraine. Separately, on 27 June, President Biden signed a National Security Memorandum (NSM) to address illegal, unreported, and unregulated (IUU) fishing and related harmful fishing practices (White House fact sheet).
At the end of June, Turkey lifted its veto on the accession of Helsinki and Stockholm to the alliance, paving the way for NATO member states to begin their ratification processes. It remains unclear how long the domestic ratification processes will take, as the NATO member countries have different procedures to ratify the agreement. NATO Secretary General Jens Stoltenberg has suggested the ratification would be swift, within the next few months. Since the NATO Summit concluded, President Biden submitted letters to Congress on 2 July, formally providing the report on the Republic of Finland and the Kingdom of Sweden’s Accession to NATO.
On 29 June, US Secretary of Commerce Gina Raimondo met with the Advisory Committee on Supply Chain Competitiveness (ACSCC) to receive updates, hear recommendations, and gather additional feedback on US supply chain-related issues. The ACSCC is preparing recommendations to the Secretary focused on issues such as fostering growth in domestic manufacturing and sustainability, federal investments to support supply chain resiliency, increasing US exports, and promoting and developing the freight industry workforce.
Both chambers of the US Congress were in recess this past week, in observance of America’s Independence Day holiday. Lawmakers return to Washington next week and have a number of priorities, including the Bipartisan Innovation Act (BIA), to address ahead of their upcoming August recess. At the end of June, Senate Republican Leader Mitch McConnell (R-Kentucky) indicated he would try to force Democrats to choose between the BIA bill and a separate Democrat-only reconciliation package that Democrats are negotiating with Senator Joe Manchin (D-West Virginia). Senate Majority Leader Charles Schumer (D-New York) and Senator Manchin have reportedly made incremental progress on a bill to provide approximately $300 billion in energy and climate spending, raise corporate taxes, and allow Medicare to negotiate the price of prescription drugs directly with the pharmaceutical industry – all of which are priorities for Democrats and President Biden, but Republicans do not support. The White House and Democrats are seeking to move both the BIA and the legislative package under negotiations with Senator Manchin concurrently.
In the last week of June, Intel, TSMC, and Global Foundries issued public warnings that continued congressional delays in the Bipartisan Innovation Act (BIA) reconciliation talks – a legislative package that seeks to reconcile the House-approved COMPETES Act and Senate-approved USICA that includes semiconductor incentives – could cause them to scale back their plans to make semiconductors in the United States. Intel “indefinitely delayed” construction of its $20 billion investment in Ohio. Earlier in June, Micron told The New York Times that failure to pass the BIA this summer could jeopardize its US expansion plans. Despite these warnings from other semiconductor manufacturers, GlobalWafers announced at the end of the month that it plans to build a state-of-the-art 300-millimeter silicon wafer factory in Sherman, Texas.
On 8 July, the United States and Canada signed a Memorandum of Understanding (MOU) to settle a dispute on trade in solar products under the United States-Mexico-Canada Agreement (USMCA). The MOU contains a mechanism to ensure that solar product imports from Canada do not undermine the existing US safeguard measure on imports of solar products. Ambassador Tai stated, “Reaching this settlement with Canada will promote greater deployment of solar energy in the United States using products from one of our closest allies, and foster a more resilient North American supply chain for clean energy products made without forced labor.”
Reaching this settlement with Canada will promote greater deployment of solar energy in the United States using products from one of our closest allies, and foster a more resilient North American supply chain for clean energy products made without forced labor.”
On 30 June, Ambassador Tai released the first Report on the Operation of the USMCA with Respect to Trade in Automotive Goods. The report examines actions taken by auto producers to demonstrate compliance with the USMCA, along with whether the USMCA’s automotive rules of origin are effective and relevant in light of changing vehicle and production technologies.
On 8 July, President Biden issued a statement condemning the killing of former Japanese Prime Minister Shinzo Abe. Next week, on 12 July, President Biden will host Mexican President Andrés Manuel López Obrador for a bilateral meeting at the White House. Later next week, President Biden is set to travel overseas for a visit that includes stops in Israel and Saudi Arabia, with the latter stop expected to focus on global energy security matters, among other topics.
Meanwhile, also on 8 July, the US Secretary of the Treasury – in consultation with the US Secretaries of State, Commerce and the Administrator of the US Agency for International Development (USAID), along with the heads of other relevant agencies – delivered to President Biden a framework for interagency engagement with foreign counterparts, pursuant to the President’s Executive Order on Ensuring Responsible Development of Digital Assets (9 March 2022). The Treasury Department also released a fact sheet on the framework for international engagement on digital assets.
On 7 July, UK Prime Minister Johnson acknowledged opposition to his continued leadership, stating:
“It is now clearly the will of the parliamentary conservative party that there should be a new leader of that party, and therefore a new Prime Minister, and I have agreed with Sir Graham Brady, the chairman of our backbench MPs, that the process of choosing that new leader should begin now, and the timetable will be announced next week, and I have today appointed a cabinet to serve – as I will – until a new leader is in place.”
This announcement came after top UK Government officials quit over the latest scandal to occur during Prime Minister Johnson’s tenure, with his resignation marking an end to three tumultuous years in which he faced multiple perceived ethical lapses. Proving to be one scandal too many, recent reports alleged Prime Minister Johnson knew about sexual misconduct concerns against a Conservative lawmaker before he promoted him to a senior position in government.
The last leadership contest took six weeks. Meanwhile, there is speculation that former Health Secretary Sajid Javid, former Treasury chief Rishi Sunak, Foreign Secretary Liz Truss, and Defense Secretary Ben Wallace may be contenders to replace Johnson as Prime Minister.
On 5 July, the UK Government introduced new economic, trade and transport sanctions on Belarus, citing the Lukashenko regime continues to facilitate Russia’s activities in Ukraine. The package extends some of the significant measures made against Russia to Belarus, including import and export bans on goods worth around £60 million. This includes: exports of oil refining goods; exports of advanced technology components, such as those used in quantum computing; exports of luxury goods, including British artwork and designer handbags; and imports of Belarusian iron and steel.
On 6 July, British International Trade Secretary Anne-Marie Trevelyan gave a speech on the UK’s trade relationship with Africa, at Invest Africa’s Africa Debate in London. She gave a speech announcing plans to address about 100 trade barriers to UK companies around the globe at the British Chambers of Commerce Annual Conference on 30 June. The Department for International Trade released a press release on the initiative, available here.
The bilateral Chambers of Commerce – the French Chamber of Commerce in Great Britain (FCCGB) and the Franco-British Chamber of Commerce and Industry (FBCCI) – launched the new UK-France Business Forum in Paris on 6 July, at an event hosted by the British Ambassador to France. The inaugural Forum “focused on technology and innovation, clean and sustainable economic growth and how to tackle supply chain challenges on both sides of the channel.”
On 1 July, following successful EU-UK engagement, the EU paused the World Trade Organization (WTO) dispute against the UK on the Contracts for Difference scheme. Trade Secretary Anne-Marie Trevelyan and Executive Vice-President Valdis Dombrovskis exchanged letters that confirmed the pause in the dispute.
On 29 June, the US-UK Financial Innovation Partnership (FIP) met in London for a Regulatory Pillar meeting. A joint statement readout reflected: “Participants exchanged views on crypto-asset regulation and market developments, including recent developments in relation to stablecoins and the exploration of central bank digital currencies (CBDCs).” Meanwhile, the next US-UK Financial Regulatory Working Group (FRWG) meeting is set to happen in July.
On 30 June, the European Parliament and Council of the Europe Union (“the Council”) reached a political agreement on the Regulation on Foreign Subsidies proposal. According to the deal, the European Commission will be empowered to investigate the financial contributions granted by the public authorities of a non-EU country to companies carrying out economic activities in the EU through two authorization tools and a general investigation tool. The co-legislators maintained the notification thresholds as proposed by the original Commission proposal for mergers (EUR 500 million) and public procurement procedures (EUR 250 million).
Executive Vice-President and Competition Commissioner Margrethe Vestager welcomed the outcome of the agreement and stressed the Regulation, when in force, would be “a very important and timely addition to our toolbox.” She added, “It will help us close the regulatory gap whereby subsidies granted by non-EU governments currently go largely unchecked.” There are a number of procedural steps before the proposal can enter into force. The European Parliament is due to endorse the position on 14 July, while the Council anticipates an agreement by 13 July.
It will help us close the regulatory gap whereby subsidies granted by non-EU governments currently go largely unchecked.
Meanwhile, the European Commission announced the conclusion of the EU-New Zealand Free Trade Agreement (FTA) on 30 June. The FTA , once in effect, will eliminate all tariffs on EU exports to New Zealand, ensure non-discriminatory treatment to EU investors in New Zealand and vice versa, and facilitate data flows, along with establish clear remit for digital trade and reduce compliance requirements for the flow of goods. European Commission President Ursula von der Leyen said of the deal: “New Zealand is a key partner for us in the Indo-Pacific region. This trade agreement brings major opportunities for our companies, our farmers and our consumers, on both sides. It can help increase trade between us by 30%.”
New Zealand is a key partner for us in the Indo-Pacific region. This trade agreement brings major opportunities for our companies, our farmers and our consumers, on both sides. It can help increase trade between us by 30%.
On 28 June, the Council reached a general approach on a deforestation regulation, after a few months of negotiations. The negotiating mandate will open the way for inter-institutional negotiations, when the European Parliament also concludes its position. According to the press release, the Council agreed to “set mandatory due diligence rules for all operators and traders who place, make available or export the following products from the EU market: palm oil, beef, timber, coffee, cocoa and soy. The rules also apply to a number of derived products such as leather, chocolate and furniture.” The press release further notes agreement on setting up “a benchmarking system, which assigns to third and EU countries a level of risk related to deforestation (low, standard or high).
UK-EU Trade Deal Update
The bill brought forward by the UK Government in mid-June that seeks to override parts of the Northern Ireland (NI) Protocol has been advancing in the House of Commons. The adoption in second reading took place on 27 June, with 295 votes in favor and 221 opposing. The bill next proceeds to Committee-level scrutiny on 13 July, where amendments are expected to be tabled that could alter the powers given to the Government. One of the more vocal opponents of the bill, Conservative MP Bob Neill is expected to propose an amendment that would be forcing the UK Government to seek parliamentary approval, when using powers laid out in this bill, through legislation.
In an opinion piece published on 26 June, a day ahead of Parliament’s debate, Foreign Secretary Liz Truss argued the NI Protocol “is currently undermining the Belfast (Good Friday) Agreement, the foundation of peace and political stability.” She noted: “Ideally, we would fix these problems through negotiation, but the EU has ruled out changing the text of the protocol. Northern Ireland has been without a fully functioning executive since February because of the protocol, at the time of a cost of living crisis and many other challenges. Therefore it is the duty of this government, as co-signatory and co-guarantor of the agreement, but also as the sovereign government in Northern Ireland, to act.”
Ideally, we would fix these problems through negotiation, but the EU has ruled out changing the text of the protocol. Northern Ireland has been without a fully functioning executive since February because of the protocol, at the time of a cost of living crisis and many other challenges. Therefore it is the duty of this government, as co-signatory and co-guarantor of the agreement, but also as the sovereign government in Northern Ireland, to act.
In an opinion piece published on 3 July, Irish and German Foreign Ministers Simon Coveney and Annalena Baerbock, respectively, further criticized the British Government’s decision to pursue legislation overriding the NI Protocol. Meanwhile, the EU-UK negotiations on the NI Protocol have halted and are unlikely to resume any time soon, given the scrutiny of the bill before the UK House of Commons.
Political uncertainty in the UK, following the resignation of many Cabinet members, Government officials, and eventually British Prime Minister Johnson, will likely influence the outcome of any future negotiations between the EU and UK. Brussels diplomats have not issued public statements following Johnson’s resignation. However, it appears there is a sense of optimism that the resignation may open an avenue for a more constructive approach in future discussions. Former Chief Negotiator, Michel Barnier tweeted: “The departure of Boris Johnson opens a new page in relations with the UK. May it be more constructive, more respectful of commitments made, in particular regarding peace & stability in NI, and more friendly with partners in the EU.”