Insight and Analysis

May 2021

By Mathilde Defarges

On 5 May 2021, the European Commission released a proposal for a new Regulation on foreign subsidies distorting the internal market. The legal document is the latest step in a process initiated last summer, and is the European Union’s latest attempt to weather rising geopolitical tensions without jettisoning Europe’s economic openness.

At present, existing European state aid control aiming at ensuring fair competition inside the EU market only apply to subsidies granted by EU Member-States. This means that while the Commission closely monitors its member states’ subsidies, and their impact on competition, foreign conglomerates using massive state subsidies to increase their economic footprint in strategic European activities go unchecked. The new regulation aims to plug the gap, by regulating subsidies from non-EU governments when they are used to finance economic activities in the internal market. But while Chinese giants are clearly the new measure’s main target, the new rules will apply to all companies benefitting from non-EU state subsidies.

The new regulation would grant the European Commission three avenues through which to investigate companies benefitting from foreign state subsidies. First, it would require entities using at least €50 million worth of financial support from a non-EU state to acquire a company to notify ex ante the Commission if the target company’s turnover in the EU is worth at least €500 million. Second, it would require ex ante notification from entities using financial support from a non-EU state when they bid in public procurement procedures in the EU worth at least €250 million. Lastly, it would grant the Commission a general power to investigate on its own initiative all other market situations and smaller acquisition or public procurement procedure – even those falling below the previously described thresholds – and request ad-hoc notifications.

Under all three procedures, the Commission would then investigate whether or not the non-EU state’s financial support distorts competition in the internal market and undermines the level playing field in the Union. Were the Commission to find that the state subsidy does indeed distort competition, it would have the power to demand that the entity benefiting from the state subsidy take a range of structural or behavioral remedial actions. These actions would range from reimbursing the distortive financial support, to divesting of certain assets, to unwinding an acquisition enabled by a distortive state subsidy. In addition, should a distortive state subsidy not be adequately notified to the Commission, the proposed regulation would impose fines worth up to 10% of infringing companies’ aggregate turnover.

The Commission is collecting feedback on the proposal until 5 July 2021. After that, the new regulation will be submitted to the ordinary legislative procedure, at the end of which it should be jointly adopted by the European Parliament and the Council. 

The recitals of the proposed regulation underline the EU’s continued commitment to multilateralism and its intention to keep its new foreign subsidies rules compliant with the WTO Agreement. However, Beijing’s sanctions on several EU officials and institutions in March have cooled Europeans’ enthusiasm for the China-EU investment deal negotiated in late 2020. This has given new momentum to this regulation and its ambition to protect EU companies from Chinese giants propped up by massive amounts of state subsidies. All companies benefitting from non-EU state subsidies should take stock now.

Invading Ukraine is Not Worth the Risk

April 2021

By Sally A. Painter

The recent military escalation in and around Donbas in eastern Ukraine, including the increase in Russian military deployments near Ukraine’s borders represent Europe’s biggest national security crisis since Russia’s invasion of Ukraine in 2014. It is not only a crisis for Europe, but is also a major challenge for the Biden Administration.

There is much debate among Ukraine watchers about whether President Putin will invade Ukraine. Some believe he is flexing his muscles for a domestic Russian audience, while others think he is testing the new U.S. administration’s resolve. Regardless of the reason, it is critically important for the Biden Administration and for Europe to tell Putin that taking aggressive action against Ukraine is not worth the political risk.

Too many times the West has failed Ukraine, dating back to the 1994 Budapest Memorandum when Ukraine gave up its nuclear weapons for the promise that the U.S. and Europe would protect its territorial integrity and political independence. Instead, when Russia invaded Crimea, the West ignored its commitment and stood by as Russia breached Ukraine’s territorial integrity, taking Crimea. Further incursions by the Russians without strong Western action will forever illustrate to other countries that the U.S and Europe are not reliable partners.

While President Biden, Chancellor Merkel, and others have stated their “unwavering support for Ukraine’s territorial integrity,” much more is needed. Putin must understand that the cost and risks of another invasion far outweigh any benefit.

Providing additional military assistance, as President Biden said he would do, is a good start as is deploying naval forces to the Black Sea. But more should be done. The U.S. and Europe should impose additional economic sanctions and cut off access to new capital by blocking Russian entities from the SWIFT system. This step would demonstrate to Putin that the West is serious and will back up its rhetoric with action, actions that would hurt Russia’s economy and its financial system.

President Putin must understand that military action against Ukraine would be a disaster not only because Ukraine is better prepared militarily than it was in 2014, but also because Russia’s citizens do not want to take up arms against their Ukrainian brethren. The U.S. and Europe must demonstrate that there are red lines that Russia cannot cross, and that invading Ukraine would force the U.S. and Europe to use its military power to protect Ukraine.

March 2021

By Etienne Bodard

With the observable consequences of climate change ever more apparent, countries on both sides of the Atlantic are moving to reduce their carbon emissions and make their economies more sustainable, in line with the Paris Agreement’s goals. However, the reforms passed to meet those targets have in some instances caused unrest. In France, the yellow jacket movement was a response to a fuel tax increase meant to incentivize a shift to less polluting vehicles. The scale of the protests prompted Macron and his team to re-assess their strategy and make French citizens stakeholders in the government’s climate reforms.

In the summer of 2019, French authorities chose 150 citizens at random to form a “Convention for Climate.” After listening to various experts on five areas – food, housing, production, transportation, and consumption – this convention was to produce recommendations to reduce France’s greenhouse gas emissions by at least 40% by 2030. In June 2020, the convention’s deliberations resulted in 149 recommendations that ranged from regulating advertising, to creating a new “ecocide” crime, to amending the French Constitution to include the fight against climate change. In response, Emmanuel Macron personally committed to holding a referendum or a vote in Parliament on all but three of the convention’s recommendations. In particular, he declined to create a new four percent tax on dividend payments.

As a result of this commitment, the French government drafted the “Climate and Resilience” bill, which it touted as a faithful rendition of the convention’s recommendations. However, the bill was the product of compromise. Indeed, the economic fallout of the ongoing COVID crisis has significantly constrained French authorities’ margins of maneuver. France’s €100 billion stimulus package, accompanied by the European Union’s financial support, has had to balance competing priorities. While keen to respect the citizen convention’s will as well as its own climate-related ambitions, the government is also trying to secure some economic growth despite the pandemic.

As a result of this delicate balancing act, the government considers that the bill implements almost all of the convention’s recommendations. But the convention’s participants and several NGOs find the new French climate bill watered down and deeply unsatisfactory. In February 2021, the final gathering of the citizens’ convention expressed its disappointment with the bill by grading the government’s rendition of their recommendations at 3,3 out of ten. That same month, in a historic decision unrelated to the bill, a Paris administrative tribunal, seized by several NGOs supported by more than 2 millions citizens, ruled that the French state had failed to uphold earlier climate commitments.

Experts are now divided. On the one hand, two official consultative bodies have warned the government that the bill was insufficient to meet France’s carbon emissions commitments and that the bill pushed the implementation of too many of its key measures’ too far into the future. On the other hand, the French ministry for the ecological transition counters these critics by pointing to the Boston Consulting Group study it requested that finds that the bill will allow the country to meet its 2030 objectives “should its provisions be fully implemented.”

On March 8, French parliamentarians have started examining thousands of amendments to the government’s text. With the 2022 French presidential elections drawing closer, this bill will most likely be the last significant reform of Macron’s term. His party will want to reassure and recapture voters who have looked to the Green party at the last local elections. In the opposition, conservatives will seek to use the debate to advocate for their idea of “common sense” climate reforms based on incentives rather than sanctions. Meanwhile, the French far-right intends to use the bill to promote its vision of “localism” – as opposed to globalism and globalization – and to propose its own referendum on the environment.

The challenges Macron and his team have faced are by no means unique to France, or to Europe for that matter. With developed economies battered by the COVID pandemic, governments around the world are struggling to balance economic growth with sustainability. But, encouragingly, the French experience shows that citizens will gladly become stakeholders if given the chance. In addition, a common challenge can give rise to a common response. In this respect, the Biden administration’s decision to return to the Paris Agreement is a unique opportunity for countries on both sides of the Atlantic to join forces and resolutely push back against climate change – the upcoming EU Climate law is expected to set up an even more ambitious target of an at least 55% reduction in greenhouse gas emissions by 2030. The joint statement that followed special envoy for climate John Kerry’s visit to the European and French institutions last week is an excellent illustration of this renewed transatlantic impetus.

Next step: the US-hosted Leaders’ Climate Summit on April 22, 2021 where President Biden is expected to announce the new US climate targets.

March 2021

By Sally A. Painter

Two years ago, we celebrated International Women’s Day with a recognition of Prime Minister Jacinda Ardern of New Zealand. The 2019 theme was “Balance for Better,” a concept that reflected Prime Minister Ardern’s commitment to strong but compassionate leadership. Earlier this week, International Women’s Day offered a new focus—“Choose to Challenge”—calling for increased recognition of gender bias, inequality, and the power of sustained and meaningful action to provoke change. Once again, we find ourselves looking to Prime Minister Ardern’s example—this time to help guide the new U.S. Administration, led by President Biden and Vice President Harris.

In October of last year, Prime Minister Ardern was reelected in a landslide victory demonstrating that inclusive leadership can be successful as well as have an impact beyond the country’s borders. In an age too often characterized by political populism and confrontation, Ms. Ardern’s message of empathy and kindness combined with skillful crisis management won her Labour Party its biggest share of the vote in more than 70 years. That contrasts starkly with the divisive politics seen during the 2020 U.S. presidential election.

Prime Minister Ardern has not shied away from making difficult choices or challenging institutionalized norms that no longer feel appropriate for today’s dilemmas. What lessons might her leadership have for the United States? Ms. Ardern has skillfully weathered difficult crises while shaping a vision that emphasizes quality of life and happiness. She has embodied a new type of leadership, one that balances kindness with strength, rejects racism and isolation, and fosters inclusion.

Buoyed by her country’s island geography, Prime Minister Ardern’s approach to combatting COVID-19 prioritized public health by enacting—at an early stage—one of the world’s strictest nationwide lockdowns. As a result, New Zealand is one of the few countries whose economy has bounced back, achieving a so-called V-shaped recovery.

Throughout it all, Prime Minister Ardern has also had to confront a challenge familiar to President Biden and Vice President Harris—the competing priorities of the two wings of her political party. As in the U.S., Ms. Ardern has consistently pushed for compromise and communication between the more liberal members of her party who seek bold action to address global challenges such as climate change and income inequality and those who wish to keep the more moderate elements of the party on board.

After the mass shooting terrorist attacks committed against the Christchurch Muslim community in March 2019, Ms. Ardern again demonstrated what it means to step up and rise to a challenge without losing sight of one’s values. Her messaging never wavered as she championed the concept of compassion as a responsibility that we all must take on ourselves and called for New Zealanders to make their country “the place we wish to be. A place that is diverse, that is welcoming, that is kind and compassionate. Those values represent the very best of us.”

In light of the recent disturbing events committed at the U.S. Capitol in Washington, DC that struck at the heart of America’s democratic values, Prime Minister Ardern’s approach serves as an important model for the new U.S. administration. Leaders must be firm about what is expected in a just and compassionate society and must challenge the inclination to trade accountability in favor of forward momentum. Actions matter and have consequences. Among the most basic requirements of participatory democracy is respect for institutions and the rule of law.

Prime Minister Ardern’s efforts to promote decency and empathy were concretely reflected in her officially released ‘wellbeing budget.’ The first of its kind, this budget seeks to change the way New Zealand’s national economic priorities are determined by prioritizing such factors as life expectancy, education levels, air quality, and a sense of belonging. It requires that any spending broadly support at least one of the government’s five key priorities: improving mental health, reducing child poverty, strengthening welfare for indigenous peoples, living in the digital world, and increasing sustainability efforts. While the wellbeing budget was introduced amid tough economic times, it is proving effective and has been embraced by New Zealanders, as evidenced by Ms. Ardern’s 2020 landslide reelection. 

Prime Minister Ardern’s approach is as refreshing as it is unique, for it asks us to consider our individual as well as our collective humanity. One without the other is not a life of dignity. Ms. Ardern challenges us to do more than what is easy and to work for what is good. To treat one another with the basic decency and respect we deserve as human beings who are all, as America’s founders so eloquently exclaimed nearly 250 years ago, “created equal.” Two years since our first article, Prime Minister Ardern remains a worthy and powerful example of leadership and vision for our new U.S. President and Vice President to consider in the years to come.

February 2021

By Willa Lerner and Nicole Baker

Like much of the world, Latin America hopes that 2021 will bring a rapid recovery to the economic damage from the COVID-19 pandemic. The pandemic arrived in early 2020 as the region struggled to navigate ongoing social unrest, limited economic growth, and slow progress on social indicators. 2021 will begin with a series of challenges, as Latin America is expected to face the most pressing outcomes due to COVID-19 of any region in the world.

In December, the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) issued its Preliminary Overview of the Economies of the region. The ECLAC report projects that 2020 will mark the largest regional economic decline in 120 years with a contraction of -7.7%. It is anticipated to be the deepest recession among the world’s emerging economic regions.

On the bright side, ECLAC projected a rebound of 3.7% growth in 2021 and 2.8% growth in 2022. However, this rebound will struggle to bring regional economic activity back to pre-pandemic levels and is based on the tenuous assumptions that vaccine distribution will increase significantly in the second half of 2021 and that oil prices will hover around $44 per barrel. It is clear that Latin American and Caribbean governments will need to urgently find ways to mitigate external financial stressors while reducing debt and alleviating poverty.

The ECLAC report also revealed that more than one third of formal employment and one fourth of the Gross Domestic Product (GDP) of Latin America and the Caribbean are generated in sectors that are “severely affected” by the crisis, including tourism services, hotels and restaurants, transportation, automation, and traditional cultural industry and manufacturing. Less than one fifth of employment and GDP are generated in sectors identified as being only “moderately affected” by the pandemic. The vast majority of job losses will be from microenterprises (21.5%), followed by small enterprises (7.3%), medium-sized enterprises (2.7%), and large enterprises (0.6%).

Furthermore, an estimated 2.7 million formal companies are likely to close in the region, of which 2.6 million are microenterprises, due to an inability to pay employees and difficulty accessing working capital. This will result in a loss of 8.5 million jobs and total regional unemployment for 2020 is forecast at approximately 10.7%. The most affected sectors of the economy have been wholesale and retail commerce, social and personal community activities, hotels and restaurants, real estate (commercial and rental), and manufacturing.

To combat the destruction of production capacities, ECLAC has proposed four sets of measures that can mitigate economic losses. The first suggestion is to extend the timeframes and scope of intervention as it relates to liquidity and company financing. The second suggestion is to co-finance company payrolls for six months to avert the destruction of production and supply capacities. The estimated cost of this measure would be equivalent to 2.7% of regional GDP. In addition, governments should make direct cash contributions to independent workers. Direct cash deposits to 15 million workers would cost approximately 0.8% of regional GDP. Lastly, governments in the region can support big companies operating in strategic sectors which have been seriously harmed by the pandemic. Large companies provide roughly 39% of all formal employment and more than 90% of exports in the region.

Economic projections also highlight the profound transformation that production chains will undergo in the region. Big companies will seek to bolster their resilience in production chains by diversifying suppliers (both in terms of countries and companies) to reduce their vulnerability; prioritizing suppliers that are closer (nearshoring); and relocating strategic production and technological processes (reshoring). The disruption of international networks and supplies over the last year has created a crucial opportunity for governments to develop and enhance national and regional capacities.

Even as increased vaccine supply supports greater control of COVID-19, many of these countries will face a long road to full recovery both economically and socially. Government revenues will benefit from a cyclical boost as economic activity begins to rebound, but tax collections are projected to remain below pre-pandemic levels and GDP is not projected to recover to pre-pandemic levels until 2024.

The pandemic has increased poverty rates and income inequality, reversing the social progress achieved in recent years and potentially resulting in calls to expand social safety nets and government spending throughout the region. These rising economic and social pressures will challenge the ability of national governments to restore lost fiscal space and get back on track for the rest of the decade.

December 2020

By Mathilde Defarges and Etienne Bodard

After four years of a Trump administration that many European leaders viewed as unilateral and confrontational in its approach, the European Union is signaling a strong willingness to work with the incoming Biden team. Over the past several weeks, European institutions have circulated two documents calling for renewed Transatlantic cooperation on a wide range of challenges.

On December 2, the European Commission released a communication entitled, “A new EU-US agenda for global change.” It highlights four areas where Brussels and Washington can better coordinate on shared concerns:

• Public health and handling the COVID pandemic. In particular, the Commission calls for closer cooperation on vaccine development and distribution, and for a joint effort to reform the World Health Organization.
• Climate change and working together to make the Transatlantic economy greener and more sustainable.
• Technology and trade. A particularly contentious area, Brussels offers to work with Washington on regulatory convergence that would help data and technology flow freely between both sides of the Atlantic. It also acknowledges differences that remain over issues such as taxation and antitrust law but calls for strengthened dialogue on those areas to minimize friction.
• Closer EU-US cooperation to protect democratic values, globally. In particular, China is singled out as an actor that both sides of the Atlantic view as a “strategic challenge” and that requires joint action.

In addition to the Commission's communication, on Monday 7 December, the foreign affairs ministers of the EU’s member states released conclusions that hit on many of the same points, and add mention of the EU's ability to pursue “its strategic course of action and (…) act autonomously (…) [to] contribute to strengthening the transatlantic partnership.” This is seen as a way for the institution to promote the now widely accepted notion of “strategic autonomy” while reconciling France's and other EU member states’ competing visions of the concept in the realm of security. The EU’s heads of state will gather for a summit on December 10-11 where they are expected to deliver further statements urging renewed Transatlantic cooperation.

European capitals are evidently very impatient to start working with the new Biden administration in January 2021. While points of friction remain, this goodwill should hopefully provide enough momentum for Transatlantic relations to chart a new cooperative path going forward.

December 2020

By Willa Lerner

The global economy has undergone a turbulent 12 months following the spread of the COVID-19 pandemic. As the pandemic’s economic consequences ricocheted around the world, countries faced severe collapses in employment, increasing border closures, and an urgent need for government-sponsored economic relief packages. As 2020 comes to a close, economic confidence has started to return—albeit with significant caveats. The rapid development of vaccines and the slow but relatively steady rise in employment has suggested that the absolute worst of the crisis may be over. However, many countries are facing a second wave (or the continuation of the first wave) of infections—delayed or mishandled vaccine distribution could prolong the economic downturn.

Earlier this month, the Organization for Economic Cooperation and Development (OECD) released the second issue of their 2020 Economic Outlook report. The report provides an analysis of major economic trends and prospects for the next two years, including output, employment, government spending, prices, and current debt balances. All 36 OECD member countries are included, as well as a select group of non-member countries. According to the report, global gross domestic product (GDP) will rise by 4.25% in 2021, reaching pre-pandemic levels, with continued growth (3.75%) anticipated in 2022.

Latin America

In September, the OECD released a Latin America Economic Outlook report, noting the unprecedented socio-economic impact of the pandemic across the region as regional GDP is expected to contract by more than 9% and poverty rates are expected to increase by more than 4.4%. As with the rest of the world, economic recovery will be uneven, with developing markets, tourist-heavy economies, and informal workers continuing to bear the brunt of the economic collapse. Across the region, almost 40 percent of workers lack access to formal social assistance and protections. Among the 2.7 million companies expected to close their doors, many are small businesses unable to ride out the economic shock, potentially resulting in the loss of 8.5 million jobs.

Argentina struggled with the consequences of a prolonged lockdown but has recently restructured its public debt and seen the beginning of a rebound in manufacturing and construction. The country’s GDP is expected to rise by 3.7% in 2021 after falling almost 13% in 2020. In Brazil, high transmission and fatality rates are expected to constrain economic activity short of pre-pandemic levels, even by late 2022. However, a temporary emergency measure supporting over 67 million low-income households will contribute to 2.6% GDP growth in 2021. Recovery in Chile will likely occur in fits and starts as the country has fallen into its deepest economic recession since 1982. Some loosening of restrictions, though, has pointed towards an uptick in short-term economic indicators. Mexico, which reported its first case of COVID-19 in late February and quickly faced a sharp drop in GDP, is now poised for a recovery heavily reliant on manufacturing exports.

Europe

GDP across the European region is projected to decline by approximately 7.5% in 2020 but reach pre-pandemic levels by late 2022 after 3.5% and 3.25% growth in 2021 and 2022, respectively. Despite some positive signals this summer, tightened restrictions following infection spikes have seen a decline in economic activity and fourth quarter GDP growth is expected to again be negative. Unemployment will likely continue to rise until mid-2021, at which point it may begin a slow but steady decline. With the new flare-up in infections, the European Union is recommending a coordinated approach to cross-border travel restrictions. In the United Kingdom, the end of the transitional period of the UK-EU Withdrawal Agreement (“Brexit”) is fast approaching on December 31, 2020. If a deal is not reached before the deadline, the UK could end the transition period facing new economic burdens on trade, productivity, and jobs.

Asia

As of July 2020, GDP in the Emerging Asia region was expected to decline by only 2.9% in 2020 and 2.8% in ASEAN-10. Pre-pandemic growth rates are expected to be reached by 2021, with 6.8% growth in Emerging Asia and 5.6% in ASEAN. Due to effective COVID-19 containment measures, Korea is expected to have the least decline in GDP of all OECD member countries—just over 1%. Japan suffered a more decisive impact, with GDP expected to fall by approximately 5.25% in 2020. The country has struggled to contain new COVID-19 infections and will likely not see a dramatic increase in growth in the coming two years. China, one of a few non-OECD member countries included in the report, faced the earliest outbreak of COVID-19 but also began the earliest economic recovery. It is expected to account for approximately one-third of the world’s economic growth in 2021.

Looking Ahead

The COVID-19 pandemic will leave a lasting impact across the globe. While the turn towards recovery seems imminent, there is much that remains to be done to alleviate the socioeconomic stratification the pandemic has exacerbated. Employment is rising, but significant numbers of people remain underemployed and economic activity is expected to remain well below pre-pandemic projections in many countries. As governments strategize their recovery policies, the OECD has highlighted three critical actions: investing and supporting skill development in essential goods and services (education, health, physical and digital infrastructure); taking decisive action to reverse the rise in poverty and income inequality; and prioritizing international cooperation to coordinate and establish processes for virus control, vaccine distribution, and economic aid.

November 2020

By Sally A. Painter

The future is bright for Transatlantic relations under the incoming Biden-Harris administration. There are high expectations for a revitalization of U.S. commitments to partner with America’s democratic allies in Europe following a contentious relationship under the Trump administration. President-Elect Biden’s foreign policy approach will reaffirm U.S. commitments to partnering with democratic allies, upholding a rules-based international order, and fostering multilateral cooperation. It will also reset the Transatlantic partnership through closer cooperation on economy, security, and climate issues as well as the promotion of liberal democratic values.

In the economic sphere, the Biden administration will seek closer economic ties with America’s European allies in two ways. First, it will reverse the Trump administration’s isolationist trade policies by eliminating tariffs placed on imports of such commodities as steel, aluminum, and autos from the European Union. Second, it will resume negotiations of the Transatlantic Trade and Investment Partnership (TTIP), which the Trump administration dropped out of in 2019. TTIP is seen as having significant potential to expand trade between the U.S. and the EU, drive growth in both economies, and support economic recovery in a post-COVID-19 era.

The Biden administration will also reaffirm U.S. commitment to the strategic NATO alliance by working closely with EU allies, including proactive measures to discourage illiberal and aggressive behavior by NATO adversaries and to engage nuclear powers in multilateral formats. The Biden administration will increase its support for Ukraine and work with NATO to impose targeted sanctions on those accused of election meddling in Europe and human rights abuses. To uphold Ukraine’s territorial integrity, the new U.S. administration will likely invest energy into bilateral defense cooperation, upgrade Ukraine’s armed forces, provide humanitarian assistance to those affected by fighting in the country’s east, and spearhead diplomatic efforts to achieve a negotiated settlement to the conflict between Ukraine and Russia.

The Biden administration may also look to cooperate more closely with the EU by imposing targeted sanctions on foreign state actors seen as engaging in efforts to undermine democratic elections among America’s allies in Europe. The proposed establishment of a 9/11-style commission tasked with investigating election meddling in the 2016 U.S. election will serve as a model for Transatlantic cooperation to target a range of bad actors. Examples of those likely to be targeted include Russian officials and business leaders implicated in election meddling and the poisoning of Russian opposition leader and anti-corruption activist Alexei Navalny; Belarussian officials overseeing harsh crackdowns on protestors; and Turkish officials supporting Turkey’s wars abroad.

The Biden administration may also seek to de-escalate the threat of nuclear confrontation by rejoining the New START Nuclear treaty, the last remaining comprehensive treaty between the United States and Russia governing nuclear arms control. Such a move could lower tensions between the two countries. The Biden team will also likely seek to re-engage Iran together with European allies to negotiate a new Iran nuclear deal. The Biden approach is aimed at limiting the threat of Iran becoming a nuclear power while paving the ground for a reversal of sanctions imposed by the Trump administration to de-escalate tensions between the U.S. and Iran.

Cooperation to combat the climate crisis will also be a major pillar of U.S.-EU cooperation under the Biden administration. During the 2020 Presidential campaign, candidate-Biden promised that, if elected, he would rejoin the Paris Climate Accord. Mr. Biden also promised to reintroduce a Border Carbon Adjustment (BCA) tax designed to limit and discourage foreign countries from polluting through the export of non-environmental products to the United States. Through negotiations, the Biden administration will work with America’s EU allies to collectively limit pollution through the importation of such harmful products.

Finally, the Biden administration will take concrete steps to bolster democratic norms in the United States and Europe. Mr. Biden has promised to establish a “League of Democracies” which would support greater mobilization among like-minded countries to promote shared democratic values, counter human rights abuses, and limit the encroachment of authoritarianism. Under such a framework, the U.S. and EU could work together to combat and condemn the actions of illiberal and nationalist governments, such as those in Central and Southern Europe against their own citizens and refugees.

In sum, the incoming Biden-Harris administration’s policy on Transatlantic relations will renew and build on previous efforts from the Obama-Biden era. It will strengthen U.S.-EU cooperation across a number of spheres, focusing on economic, security, and climate issues while also establishing a framework to more assertively promote democratic values on the international stage.

November 2020

By Mathilde Defarges

In 2013, over 1,000 Bangladeshi workers died when a garment factory that manufactured apparel for many major American and European brands collapsed due to the building’s egregious state of disrepair. This prompted civil society groups and citizens worldwide to demand that companies pay closer attention to the working conditions along their chain of suppliers. Since then, growing inequalities, trade wars, the coronavirus pandemic, and climate change have revealed a need for more sustainable corporate governance, focused less on short term profits, and more on long term value generation for the whole of society. Policy makers in the European Union are currently developing a comprehensive legal framework around the concept of sustainable corporate governance and more companies should embrace this paradigmatic shift that will help them stay competitive and relevant in an increasingly fast-moving world.

In April 2020, European Commissioner for Justice Reynders announced a legislative initiative on sustainable corporate governance and mandatory due diligence. In an impact assessment released in July 2020, the European Commission explains that “many companies (…) face pressure to focus on generating financial return in a short timeframe” and deplores the negative externalities caused by this race for short-term gains. Instead, the European institution suggests that companies put more emphasis on the sustainability of their business practices. In this context, “sustainability” is used as an umbrella term to cover notions such as environmental and social impact, as well as to denote a focus on long-term profit generation over the currently prevalent short-termism.

While the European Union’s sustainable corporate governance initiative seeks to synergize with some of its green aspirations, it also comes from a place of pragmatism and economic calculus. Research referred to in the July 2020 impact assessment highlights that companies performing well on sustainability factors not only tended to be more competitive than their peers, but also weathered the COVID-19 crisis better. With the EU preparing to disburse billions of euros to kickstart its battered economy, its renewed emphasis on sustainability is at least partly driven by member states’ expectations that those funds be spent as efficiently as possible.

In addition, the European Commission is not working in isolation. In late October 2020, the institution opened a public consultation to collect views from businesses and civil society on how to best promote sustainable corporate governance. In parallel to the Commission’s efforts, the European Parliament has also been following the issue closely. In particular, the European Parliament has zeroed in on the idea of mandatory due diligence as a way of incentivizing a transition to more sustainable business practices.

During Reynders’ appointment hearing in front of the European Parliament in October 2019, both parliamentarians and the then Commissioner-designate had highlighted how strengthening companies’ due diligence obligations, in particular regarding their chain of suppliers, was necessary to enable a switch away from short-term thinking and toward sustainable corporate governance. In a September 2020 report, the Committee on Legal Affairs explains that voluntary due diligence standards that are currently the norm have “severe limitations.” Instead, the Committee proposes that national authorities be imbued with new powers to both supervise corporate due diligence practices, as well as impose sanctions where necessary.

This proposal draws its inspiration from laws that already exist in France and the Netherlands where large companies can be held liable for environmental damage or human rights violations that occur along their supply chains. As with the EU’s proposals, the reporting requirements mandated by these national frameworks also have the advantage of empowering stakeholders such as trade unions and NGOs by giving them a more meaningful stake in corporate governance.

Moreover, conversations around sustainable corporate governance and ways of improving due diligence are not limited to Europe. In August 2019, Business Roundtable released its “Statement on the Purpose of a Corporation” that has since been signed by over 200 CEOs. The document acknowledges the importance of “embracing sustainable practices,” as well as the need to “generat[e] long-term value.” A quick glance through the document’s signatories reveals many of the United States’ most competitive and profitable companies.

Beyond the transatlantic community, the United Nations is also negotiating a “legally binding instrument to regulate the activities of transnational corporations and other business enterprises.” While the primary focus of the text is the protection of human rights, it taps into many of the same concerns behind the EU’s push for more sustainable business practices. Despite the disruption caused by the ongoing pandemic, notably hampering the EU delegation’s participation in the conversation, negotiations are slowly moving forward.

Much like it did on data protection, the EU wants to set a global trend on the issue of sustainable corporate governance. Growing inequalities caused by globalization are placing democratic societies under unbearable strain. However, the damage trade wars, COVID 19, and, increasingly, climate change are causing to global value chains provides a unique opportunity to reframe and reorient the trajectory of globalization towards longer term as well as fairer profit generation. By supporting and embracing this change, companies around the world stand to secure their competitiveness, reputation, and bottom line in a rapidly evolving global landscape.

October 2020

By Jeremiah J. Baronberg

Famed physicist and symbol of Soviet dissent, Yuri Orlov passed away last week. Forty-four years ago Orlov was widely recognized for his quest to shine light in a region covered in the darkness of authoritarianism. Sitting in their homes listening intently to the BBC, Voice of America, and Radio Free Europe/Radio Liberty, people in the Soviet Union and across the Warsaw Pact region were inspired-—and given a glint of hope—by Orlov and his small band of fellow dissidents. While Orlov’s name may not be familiar to many current students of global politics, he was once considered to be on par with such noted Soviet dissidents as Andrei Sakharov and Aleksandr Solzhenitsyn.

In 1976 Orlov founded the Moscow Helsinki Group as a way to monitor Soviet adherence with the civil rights protections outlined in the 1975 Helsinki Accords. The Helsinki Accords were signed by 35 nations and were aimed at improving détente between the Soviet bloc and the West. The on-the-ground evidence of Soviet noncompliance with the Helsinki Accords provided by Orlov served as a key component to strengthen the West’s international negotiations with the U.S.S.R. The Helsinki movement would in turn serve as a precursor to the peaceful revolutions that took place across the region beginning in 1989.

Orlov has been lauded as a human rights hero and as an individual whose citizen activism impacted the course of history. While the Helsinki Accords were criticized at the time for their acceptance of Soviet annexation of the Baltic states and status quo border issues, they proved to be a useful vehicle for ordinary citizen dissidents—such as Orlov—in their efforts to draw international attention to Soviet human rights abuses. Orlov’s activities also spurred similar watchdog groups within the Soviet bloc, Europe, and North America and helped institutionalize the practice of human rights monitoring by nongovernmental (NGO) and civil society organizations.

The life of Yuri Orlov and his global impact continue to resonate today in key ways.

1. The need for vigilance and accountability to supplement international agreements. Yuri Orlov showed that international diplomatic agreements, regardless of their lofty ideals, are incomplete without constant vigilance and monitoring. As his fellow activist and refusenik friend Natan Sharansky feared at the time of the Helsinki Accords’ signing, “As dissidents in the USSR, we read the news with deep mistrust. We had no doubt that the Soviet Union would ignore this commitment and enjoy the benefits of the agreement while shrouding its crimes in lies...But Uri (sic) Orlov put his foot down.” Orlov’s novel approach to citizen monitoring brought teeth, as it were, to the Helsinki Accords’ vision by helping hold its signatories accountable in the eyes of the international community.

2. The role that concerned citizen action plays in history. Orlov’s significance is an expression of the ordinary individual’s power to impact officialdom and state level diplomacy. Operating outside the halls of power, Orlov’s revolutionary citizen-based approach paved the way for the formation of future NGOs and civil society watchdog groups, such as Human Rights Watch. Moreover, by shining a light on Soviet rights abuses, Orlov’s citizen activist model inspired complementary initiatives such as those that called for freedom of emigration from the U.S.S.R. This emigration from the Soviet Union that followed would dramatically change societies and populations in the United States, Europe, Israel, and elsewhere. Like Yuri Orlov, émigrés from the former Soviet bloc have had a marked impact on societies around the world. Their skills and experiences have enriched a range of national cultures and their perspectives have expanded understanding of totalitarianism in modern times. In their adoptive lands, these émigrés became fierce defenders of freedom and individual liberty and passionate exponents of not taking these values for granted.

3. The importance of maintaining core principles even as geopolitical circumstances change. With the fall of the Soviet Union, the Helsinki Accords morphed into the Organization for Security and Co-operation in Europe (OSCE). This re-envisioned entity would be responsible for monitoring compliance with the Helsinki Accords across an enlarged 57-member nation region. As the world’s largest security-oriented intergovernmental organization today, the OSCE mandate is broad. It includes setting standards in an array of key fields including military security, arms control, economic and environmental cooperation, human rights, freedom of the press, free and fair elections, and conflict resolution. The U.S. Helsinki Commission plays this role on behalf of the United States of monitoring and encouraging compliance with the Helsinki Accords and OSCE commitments.

Yuri Orlov overcame many obstacles in the quest to advance his beliefs. The Helsinki Accords’ human rights provisions were powerless to keep Orlov from enduring nearly a decade of imprisonment, hard labor, and internal exile by Soviet authorities. Still, Orlov remains a symbol of the importance of constant vigilance on behalf of fundamental rights—and of the respect owed to those who fought, and suffered, in the name of these freedoms.

September 2020

By Karen A. Tramontano

Having celebrated Labor Day in the United States amid the global COVID-19 pandemic, it is important to celebrate workers—especially those known as “essential workers.” It is equally important to know the facts about these workers, including the jobs they perform and the services they provide.

Essential workers are defined by the general categories in which they work, including healthcare, transportation, cleaning services, grocery, retail, wholesale stores, and delivery and postal services. Essential workers are overworked and underappreciated and the positions they occupy are underpaid with little or no safety net and few, if any, employment protections. While these workers have always been essential to the overall health and welfare of society, the contribution these workers make has been ignored—until now.

Here are some of the key facts about essential workers: Essential workers serving society on the frontlines are disproportionately women—nearly 65 percent are women. Women are overrepresented in the caring industries: 76 percent in healthcare and 85 percent in child and social services. This trend runs across all essential occupations, including customer service representatives, fast food workers, and retail sales clerks.

People of color are also overrepresented with one in four serving in a frontline occupation. Latinos are overrepresented in cleaning occupations and African Americans are overrepresented in childcare and social service occupations. Today, one in six essential workers are immigrants and are working in dangerous, low paying jobs, including, as we have seen, in the meat packing industry.

Essential workers tend to be over 50 years old and have family care obligations, including child-care and elder care. One third of all essential workers are members of low-income families.

COVID-19 has put a human face on these workers—a face that for far too long has not been seen. The challenge for each of us as we reflect on this past Labor Day is to continue to see the faces of essential workers long after COVID-19 is brought under control. As we look for their faces, we must support the policy changes necessary to ensure these workers are not only celebrated, but also can access the economic and health care benefits they deserve as U.S. workers.

This article was compiled using data from “A Basic Demographic Profile of Workers in Frontline Industries,” Center for Economic and Policy Research, April 2020, https://cepr.net/wp-content/uploads/2020/04/2020-04-Frontline-Workers.pdf

September 2020

By Sally A. Painter

This article was originally published on the Atlantic Council's New Atlanticist blog

The three Baltic countries of Northern Europe have long been allies of the United States and valued members of the NATO community. In the 20th century, the United States refused to recognize the Soviet Union’s claim on Latvia, Lithuania, and Estonia and supported the restoration of their independence in 1991. Our Baltic friends never forgot this important solidarity, and since then have promoted democracy and stability in their corner of Europe and worked diligently to attain membership in NATO and the EU community through systemic reforms to their economy, governance, and security. Rightfully so, the Baltics saw their integration into Euro-Atlantic institutions as an important deterrent to Russian influence, which continues to loom as a regional threat to their sovereignty and national security.

These threats have only escalated since Russia’s invasion of Georgia in 2008 and the annexation of Crimea from Ukraine in 2014. In this context, it is vital that the United States firmly recommit to NATO and increase its support of the Baltic countries to ensure the continuation of strong bilateral relations and the effective partnerships that have strengthened the entire transatlantic community.

Membership in NATO, a long-time aspiration for the Baltics, required that they undergo robust changes, and the subsequent reform process served as a key element for strengthening bilateral relations with the United States and a foundational pillar of transatlantic security. Since their accession in 2004, Latvia, Lithuania, and Estonia have been responsible members of, and active contributors to, the NATO alliance. Despite the size of their national military forces, each country has actively supported regional security in Europe and participated in global NATO activities, including contributing troops to missions in Afghanistan. By 2019, all three countries increased their defense spending to the recommended two percent of their overall national budgets.

This upwards trajectory has resulted in vital support from the international community. At the 2016 NATO Summit in Warsaw, Poland, NATO reaffirmed its support for the Baltics by introducing Enhanced Forward Presence (eFP) units to all three Baltic states as well as Poland. NATO also now provides fighter aircraft to the Baltics, which have been increased following the 2014 Russian invasion of Ukraine. 

Unfortunately, the non-permanent nature of these programs is not sufficient to guarantee the full military capabilities of the Baltics nor to bring peace of mind to its citizens. Given increased Russian presence in the region, each country must rely heavily on the collective defense agreement of the North Atlantic Treaty if it hopes to stand a chance against foreign interference. The United States together with its European partners and the international community must do more to prevent such foreign interference and ensure that the Baltic states are fully equipped with the tools and support structures that underpin their security.

To date, the United States has demonstrated its support for the Baltic region through the US-Baltic Charter, an alliance of values among the countries signed in 1998. The signatories agreed to a shared vision “of a peaceful and increasingly integrated Europe, free of divisions, dedicated to democracy, the rule of law, free markets, and respect for the human rights and fundamental freedoms of all people.” The Charter’s emphasis on the vitality of independence and territorial integrity established grounds for a prosperous partnership and paved the way for Baltic integration into NATO. It provides an established path to follow for re-engaging with our allies and strengthening this vital transatlantic partnership. Perhaps even more so than in any recent year, this mission remains relevant and timely.

Latvia, Lithuania, and Estonia have strongly demonstrated their dedication to the transatlantic alliance and have worked diligently to implement systematic reforms on a variety of shared concerns ranging from energy security, transparency, and economic vitality.

It is therefore highly unfortunate to witness recent statements and actions taken by US President Donald Trump that do not appear to recognize these important achievements nor the Baltics’ role as vital allies. Recent public comments by the president and in private conversations reported by former National Security Advisor John Bolton indicate that rather than strengthening and appreciating the value of the NATO Alliance, if elected to a second term, President Trump may wish to pull the United States out of the North Atlantic Treaty. This has not gone unnoticed by our European friends. A recent New York Times article notes analysis by the Atlantic Council’s Jorge Benitez that some European officials “see the escalation of negative steps, and they are definitely concerned that that negative pattern could continue if Trump is re-elected.” This concern is not only worrying to Europeans but also to many leaders in the US Congress. Senator Jeanne Shaheen (D-NH), a senior member of the Senate Committee on Foreign Relations warned in the same article that “withdrawing from NATO would be nothing short of catastrophic.”

The United States has profound interests in maintaining NATO and the sovereignty and security of the Baltic region. Now is the time for the United States to rise to this leadership role by deepening our commitment to NATO and supporting the Baltic countries to foster a strong and united transatlantic community. There exists today the opportunity to work on a new US-Baltic Charter to address today’s challenges. These could include promoting democracy, free and fair elections, and freedom of the press in the region; combatting disinformation; expanding bilateral trade and investment between the United States and the Baltics; and supporting nations that wish to join the Euro-Atlantic family.

Just as in 1991, a show of solidarity by the United States can help strengthen and protect the Baltic States, allowing them to continue to grow and faithfully contribute to the transatlantic community.