In addition to sending the visual message of a United States resurging from the global pandemic, the fruits of President Biden’s first overseas trip included several key commitments made with US allies – UK Prime Minister Boris Johnson, the G-7 heads of state, and the European Union. In this post we highlight those commitments that impact trade and international business.
In his week-long trip (in June 2021) to three European countries, President Biden held meetings that focused on rebuilding strained relationships with key allies and established the tone for a new one with Russia. At the same time, these meetings bore fruit on several issues that his Administration has clearly been working on since taking office. It began with President Biden’s meeting with UK Prime Minister Boris Johnson where the two countries reaffirmed the countries’ shared global vision and position on key issues that would be addressed at the G7 Summit.
G7 Summit Outcomes
Global Corporate Minimum Tax
The meeting of the leaders of the Group of Seven endorsed the decision of the G7 meeting of finance ministers, held just prior to the Summit, to work towards a Global Corporate Minimum Tax of at least 15%. Pointing to the $12 trillion of support their governments provided during the pandemic with much more to come, the statement from the G7 leaders underscored the need to reach agreement on a fairer tax system; one that reverses the race to the bottom on taxes paid by the largest multinational corporations. In this context, it is also worth noting the G7 commitment to donate 1 billion covid vaccine doses to countries still struggling to vaccinate their citizens; their feet must be held to the fire on this promise.
Multilateral Trade Issues
Speaking more directly to trade issues, the leaders pledged to work with other WTO members at the 12th WTO Ministerial Conference, (November, 2021) to conclude the multilateral negotiation on fisheries subsidies and advance negotiations on e-commerce. They also endorsed the commitment of the G7 Trade Ministers to review their trade policies to ensure that they support women’s economic empowerment; to promote the transition to sustainable supply chains by aligning trading practices with commitments made under the Paris Agreement; and to formulate pragmatic and holistic solutions to support open, diversified, secure, and resilient supply chains in the manufacture of COVID-19 vaccines and other critical goods. The G7 leaders also tasked their Trade Ministers with identifying areas for strengthened cooperation towards eradicating the use of forced labor in global supply chains by the Ministers’ next meeting in October, 2021.
To strengthen the multilateral trading system, the leaders identified the goals of working at the WTO to modernize the rules to better reflect the challenges of the 21st century global economy. They also pledged to address the longstanding issues in the WTO’s dispute settlement system and negotiating functions to achieve their proper functioning. They committed to ensure that special and differential treatment rules reflect developments in the global economy while accounting for the needs of the least developed and low-income developing countries and ensuring that any modernization of the global trading system supports the social and economic growth and development of these countries.
The Communique also includes a section on “Future Frontiers” where the leaders commit to an ongoing and shared vision encompassing from cyber space to outer space. The 70-paragraph G7 Communique ends with a commitment to support sustainable growth in Africa, announcing plans to invest a minimum of $80 billion into Africa’s private sector over the next five (5) years to support sustainable economic recovery and growth in line with the Addis Ababa Action Agenda. Noting other initiatives underway in this area, the leaders declared these steps to be a central focus of their new strategic approach on global responsibility and international action.
US-EU Summit Outcomes
Among the biggest take-aways from the US-EU Summit are the commitments made to address two major areas of tension in US-EU trade relations: (i) Trump tariffs on steel and aluminum and EU retaliatory measures; and (ii) the 30-year dispute over aircraft subsidies.
Addressing Trump Steel & Aluminum Tariffs
The U.S. and EU announced a commitment to, over the course of 2021, work together to address the tensions over steel and aluminum excess capacity issues which led to the imposition by the Trump Administration of section 232 tariffs on imports of steel and aluminum. In response to this unilateral attempt to address the global issue, several countries, including the EU, took retaliatory measures against US imports into their countries. The Biden Administration has not as yet lifted the tariffs and the retaliatory measures also remain in place. As outlined by the U.S.-EU Summit Statement, the U.S. and EU will engage in discussions to resolve existing differences and tensions arising from the US tariffs, work towards ending the WTO disputes on this issue, and create a working group to discuss the overcapacity and related issues.
Addressing US-EU Aircraft Subsidies
An outline to resolve their 30-year-old large civil aircraft dispute and suspend tariffs on $115 billion in related products for a period of five (5) years is a second key outcome of the US-EU Summit. Both sides have been contesting the support that they each provide to their aerospace industries (the U.S. to Boeing and EU to Airbus). Up until 1992, a “Bilateral EU-US Agreement on Trade in Large Civil Aircraft” had allowed each party to provide a certain level of support. Differing even over what led to the end of this agreement, since 2004 the two parties have been involved in WTO disputes over this issue. At the summit, they reached agreement on a Joint US-EU Cooperative Framework for Large Civil Aircraft. Its provisions include establishment of a Working Group which will consult at least every six (6) months to analyze and address any disagreements that may arise; agreement to provide financing for the production of large civil aircraft on market terms and for R&D through an open and transparent process; making the results of fully government funded R&D widely available; and the temporary suspension of retaliatory tariffs as a carrot for continued collaboration and cooperation.
Technology & COVID
At the Summit, the two sides also agreed to establish a high-level U.S.-EU Trade and Technology Council (TTC). Major goals of the TTC will include growing the bilateral trade and investment relationship, avoiding unnecessary technical barriers to trade; strengthening global cooperation on technology, digital issues; and building a U.S.-EU partnership on the rebalancing of global supply chains in semiconductors. They also agreed to supply 2 billion more vaccine doses to the COVAX Facility by late 2021 and to create a joint U.S.-EU COVID Manufacturing and Supply Chain Taskforce to identify and resolve issues around expanding vaccine and therapeutics production capacity. Actions to explore include building new production facilities, maintaining open and secure supply chains, avoiding unnecessary export restrictions, and encouraging voluntary sharing of know-how and technology.
Examining the fruits of President Biden’s first overseas trip shows that the choice of Europe was intended to send a very clear message to US allies and competitors alike. Notwithstanding his meeting in Geneva with Vladimir Putin of Russia, the major outcomes came from the discussions with PM Johnson of the UK, and from the G-7 and EU Summits. These outcomes sent the message that not only is the US back on the world stage, but it is implementing a Biden trade policy which focuses on building a coalition to counter China’s (and Russia’s) influence, whether in cyberspace, outer space, or in Africa.
Cross-posted at Andrea’s blog site, DevelopTradeLaw.