Insight and Analysis

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.

September 2020

By Karen A. Tramontano

As the 2020 U.S. presidential election approaches, many of our colleagues across Europe, Asia, Latin America, and Africa have asked: “What is the Electoral College”? This question is always followed by: “Why aren’t U.S. Presidents elected by popular vote?” The latter question is especially poignant when five former Presidential candidates lost the popular vote but nonetheless went on to become President with the most recent being George W. Bush (2000) and Donald J. Trump (2016). [1]

The Framers[2] of the U.S. Constitution were divided about how the U.S. President should be elected. Some believed the U.S. Congress should select the President, while others thought the Presidency should be free from Congressional influence. Some Framers were concerned that citizens, many of who were not educated could not handle the responsibility of electing the President and that “mob rule” would result. Others were concerned that a populist President would be far too powerful and that his power would corrupt the country and undermine the young democracy.

The compromise the Framers’ reached was to create “electors.” The vote by the “electors” would reflect the majority of the votes cast in their state but the popular vote would not determine the outcome of the Presidential contest. Instead, the number of “electors” assigned to each state (electoral votes) would determine the winner. The number of “electors” was based on the total number of elected Representatives serving in the U.S. House and Senate. This system, known as the Electoral College, governs the election of the U.S. President today.

Moreover, because the number of “electors” was based on the apportionment of U.S. Representatives and because the Framers based apportionment on the so-called “Three-Fifths Compromise of 1787”, the Electoral College is directly connected to the institution of U.S. slavery. The Three-Fifths Compromise arose because delegates from slaveholding and non-slaveholding states feared losing political power. Delegates from slaveholding states wanted slaves to be counted for the apportionment of representation in Congress, while delegates from non-slaveholding states did not want slaves to be counted. The compromise: slaves would be counted as “three-fifths” to determine “apportionment”—the number of elected Representatives from each state in Congress.

The effects of this slave-era system remain and continue to set the parameters by which Presidents are elected. While apportionment is now based on the total number of persons residing in the state, the Electoral College continues to determine Presidential outcomes regardless of the national popular vote. Moreover, with every state having two Senators—regardless of population—the Electoral College continues to ensure that small states have voting power that is disproportionate to their population.

Why does the Electoral College matter in the upcoming 2020 Presidential election? Even before a single vote is cast, we know for which candidate many of the states will cast their Electoral College votes. Voters in about 34 of the 50 states so overwhelming support either former Vice President Biden or President Trump that we can safely predict the number of Electoral College votes each candidate will receive well before the election. For example, California and New York electors will cast votes for Mr. Biden, while Wyoming and Idaho will cast votes for President Trump. As a result, we can safely predict that Biden will begin the race with 212 Electoral College votes while Trump will begin with 115 votes. To be elected the 46^th President of the United States, a candidate must receive a majority of the Electoral College votes cast—270.

With the results in 34 states known, there are at least 16 states where the election’s outcome remains in doubt. These states are known as “battleground states.” Winning as many battleground states as possible is essential to winning the election. Typically, candidates—including sitting presidents—visit each battleground state multiple times, holding rallies and buying ads on local TV and radio. With COVID-19, Presidential campaigns have had to restrict in-person rallies and rely on other forms of engagement to rally their voters.

In recent years, Presidential campaigns have relied more heavily on social media platforms to reach voters. As a result, these platforms have become another battleground for campaign ads. More importantly, as seen in the 2016 election, foreign interference by state actors such as Russia used social media platforms to seed disinformation. A recent report by intelligence officials has found that Russia and other states will attempt to influence the 2020 Presidential election again.

The suitability of the Constitutionally mandated Electoral College will continue to be a matter of vigorous debate. Those who want to see the Electoral College removed from the U.S. Constitution argue that the current system undermines public confidence in U.S. Presidential elections because the result does not reflect the voters’ choice. Defenders of the status quo believe the Electoral College maintains the balance of power among states that the Framers sought. In 54 days, we will know who the next President of the United States will be. Once in office, the 47^th President will have to confront the raging pandemic, demands for racial justice, and an expanding economic crisis.

Given the ongoing debate about the Electoral College and these crises, it is essential that the results of the 2020 Presidential election be determined by a majority of U.S. voters and not merely the Electoral College. After more than 200 years, U.S. voters deserve to have their voice and their vote count.

[1] The other three Presidents who lost the popular vote were: John Quincy Adams (1824), Rutherford B. Hayes (1876), and Benjamin Harrison (1888).

[2] The Framers of the U.S. Constitution were men who represented the original 13 colonies and served as delegates to the Constitutional Convention of 1787.

July 2020

By Mathilde Defarges, with contribution from Étienne Soula

“Naïve free-traders” no more

On 17 June 2020, the European Commission adopted its “White Paper on levelling the playing field as regards foreign subsidies.” The White Paper comes at a moment when the European Union is doubling down on efforts to reach a global level playing field on trade. In parallel to new rules on foreign subsidies, the EU is carrying out negotiations around the globe to increase reciprocity and lower trade barriers. According to Valdis Dombrovskis, the European Commission’s executive vice-president in charge of economic policy, the EU is now determined to address “a great asymmetry in market access.”

Enter the EU’s new White Paper. While the new rules are not final, and currently open for public consultation, they signal the EU’s intention to ensure that the internal market provides a level playing field as well as fair competition between European companies and foreign subsidized companies. The White Paper also indicates how the European Commission is likely to legislate in order to make this happen.

The White Paper identifies three ways in which foreign subsidies are problematic. Firstly, it finds that certain foreign subsidies create distortions in the European market. European Competition authorities can already control whether European companies benefit from state subsidies and check that those subsidies do not impede competition. But existing legislation only concerns subsidies granted by EU member states. The White Paper proposes to create a broad catch-all instrument to act against any foreign subsidy creating a distortion in the internal market. For instance, the new rules would capture foreign subsidiaries established in the EU benefitting from foreign subsidies from their parent company’s home state, especially if that that support were to undercut competitors in the internal market.

Secondly, building on the catch-all provision, the White Paper highlights the particular danger posed by foreign subsidies used to help a foreign company take over a European competitor. Here, high profile cases of Chinese acquisitions have recently caused concern in several European capitals that Beijing was financing the purchase of European assets in order to siphon know-how and expertise back to China.

The third issue addressed by the White Paper concerns foreign subsidies that enable companies to undercut their competitors in European public procurement processes. In particular, the EU is concerned that foreign subsidies are allowing companies to make bids below market price, or even below cost. There again, Chinese conglomerates pushed into overcapacity thanks to Beijing’s overly generous subsidies have delivered underpriced infrastructure projects in the EU, drawing concern from some Members of the European Parliament.

To address this triple threat posed by foreign subsidies, the White Paper would empower the European Commission, sometimes alone and sometimes in coordination with national authorities, to investigate suspicious foreign subsidies and, where appropriate, to take remedial measures. These measures would range from fines, to the blocking of an acquisition enabled by a distorting foreign subsidy, to the exclusion of bidders who use foreign subsidies to undercut their competitors in a European public procurement process.

The new measures come on the heels of a 2019 regulation on the screening of foreign direct investments (FDI) into the Union. The 2019 regulation approached FDI through the prism of national security, which falls within the purview of member states, and affords only a limited role to the EU. By contrast, the new rules contained in the White Paper would frame the issue of foreign acquisitions in terms of competition law, an area over which European institutions enjoy exclusive competence.

Also relevant to Brussels’ proposal on foreign subsidies is the joint initiative by the EU, United States, and Japan to better address the issue at the WTO. In January 2020, Trade representatives from all three sides issued a joint statement in which they reiterated their common resolve to “to strengthen existing WTO rules on industrial subsidies.”

Notably absent from this group was China. And while the EU White Paper does not specify which countries would be the main targets of the new measures it proposes, the high level of state support Beijing offers to large Chinese corporations would cause many of them to fall foul of Brussels’ proposed rules. Furthermore, as the economic consequences of COVID-19 continue to unfold, the EU has moved to more proactively defend the internal market. This mindset explains Brussels’ decision in June 2020 to slap tariffs on glass fiber produced by Chinese companies based in Egypt – EU rules previously only looked at subsidies provided by the host government. Aware of the changing winds, Beijing has already reacted to the White Paper with the Chinese ambassador to the EU urging the bloc to “refrain from creating new trade barriers under the pretext of subsidies.”

The exact scope and objectives of the proposal are still being debated within European institutions as it makes its way through the European Parliament’s Committee on International Trade. Politico quotes a centrist parliamentarian as well as the head of a Brussels-based think tank warning against the potential negative consequences of an overly restrictive foreign subsidies’ framework, such as reduced investment to Europe or potential retaliation from countries whose companies are targeted by the new rules. By contrast, EU officials like Competition Commissioner Margrethe Vestager and Internal Market Commissioner Thierry Breton are putting their whole weight behind the White Paper.

For now, the havoc wreaked by COVID-19 is giving more momentum to those who would prioritize the recovery of Europe’s economy over all other considerations. The Wall Street Journal is one of several publications warning that the new rules put forward by the White Paper would apply to American companies benefiting from selective tax incentives in the United States, just as they would to Chinese conglomerates benefiting from cheap loans by state-owned banks.

The White Paper on foreign subsidies marks a new step in the EU’s ongoing efforts to better protect its companies and the internal market from unfair competition. With the Trump administration making no secret of its disdain for the WTO and with an assertive Beijing looking to achieve dominance in all key sectors of the world’s economy by 2025, EU legislation seems to be the most reliable way to ensure that European companies enjoy fair competition, at least inside the internal market. And, with proper coordination with allies in Washington, Tokyo, and beyond, the new rules could even set a trend and lead to a more level playing field globally.

July 2020

By Sally A. Painter

Over the years, relations between NATO and Ukraine have been trying and complicated. Perhaps the lowest point in recent memory was at the Bucharest Summit in 2008 when NATO refused to offer a Membership Action Plan (MAP) to Ukraine over the objections of the Bush Administration and despite its strong domestic support in country. Ukraine's move to Euro-Atlantic integration was stymied and NATO lost credibility on its open door policy. Worse—Russia took this as a sign that NATO had lost its commitment to new entrants and invaded Crimea and the Donbass with limited consequences.

However, on June 12, 2020, this strategic mistake was somewhat corrected when NATO recognized Ukraine as an Enhanced Opportunities Partner, an important development for both the Alliance and Ukraine as it demonstrates that NATO continues to evolve. More importantly, it rewards Ukraine for its long standing cooperation in Afghanistan and Kosovo, as well as its strong contributions to the NATO Response Force and NATO exercises.

While a significant development, full integration requires that the government take a number of important steps, including adopting a new law on the security services as well as new laws on intelligence and state procurements, among other things. This is a time when strong transatlanticists on both sides of the Atlantic need to step up and embrace this development encouraging the Zelinski Administration to take advantage of the new opportunity by demonstrating its further commitment to the West.

NATO member states for their part must support and encourage these actions. It also gives us an opportunity to think about alternative structures given that NATO accession is not currently possible. Some creative ideas include: The Three Seas Initiative and Bucharest Nine Group could be asked to include Ukraine, Georgia, and Moldova; and Poland, the Baltic States, and other close friends of Kyiv could be encouraged to conclude mutual aid pacts with Ukraine similar to Turkey’s 2010 partnership agreement with Azerbaijan. Additionally, Washington could extend its bilateral strategic partnership charters with Kyiv and Tbilisi to a multilateral format comparable to the older Baltic and Adriatic Charters.

This is the time to work together to take advantage of a new dynamic working toward "the art of the possible."

July 2020

By Daniel P. Erikson and Willa Lerner

On Wednesday, July 1, 2020 the North American Free Trade Agreement (NAFTA) replacement process reached completion with the official implementation of the U.S.-Mexico-Canada Agreement (USMCA). The USMCA was ratified by Congress and signed into law by President Trump in January 2020, signaling the fulfillment of one of the Trump Administration’s key promises from the early days of the 2016 presidential campaign.

We began the “Spotlight on NAFTA” coverage in September 2017 when the first round of trade negotiations between the three countries kicked off. The intense pace of renegotiations continued throughout the fall of 2017, as we analyzed why NAFTA was still on the brink and warned of further turbulence ahead. By May 2018, NAFTA negotiations had blown through the initial deadline of December 2017 and headed to overtime. Following a “permanent round” of negotiations throughout the summer, September 2018 marked a turning point in the “deal or no deal” process as the U.S. indicated a plan to sign a trade deal with only Mexico. Shortly thereafter, Canada was added to the preliminary trade deal and the tides of the “horrible” NAFTA began to shift to the “historic” USMCA (October 2018). Then, in June 2019, we asked “Is the clock ticking for the USMCA?” as the Trump Administration began to submit the implementing legislation to Congress. By January 2020, the two years of intense negotiations culminated in the signing of the USMCA.

Where are we now?

As of May 2020, data from the U.S. Census Bureau shows that, for the year-to-date, Canada is the United States’ largest trading partner with 13.8 percent of total trade. Mexico falls just below in second place with 13.6 percent. 2020 U.S. trade with USMCA partners stands at $406.1 billion as Canada and Mexico buy just over one-third of U.S. exports. Prior to the COVID-19 pandemic, the U.S. Office of the Trade Representative stated that the USMCA was expected to raise real U.S. GDP by $68.2 billion (0.35% of total GDP) and generate up to 176,000 jobs. Additional developments have included:

• The Trump Administration released hundreds of pages of new industry guidance in June 2020, only weeks ahead of the USMCA July 1 implementation date. As a result, company executives, labor union leaders, and other government officials have been scrambling to make the necessary adjustments. Many of the provisions, particularly those related to labor rights, will need to be phased in over multiple years.
• Many large manufacturing companies have already faced significant supply chain and operation disruption as a result of the COVID-19 pandemic. In the auto industry, automakers requested and received an additional two years to complete their transition period for implementing the production and supply changes necessary for compliance.
• The U.S. Customs and Border Protection Agency has indicated that, for the next six months, the agency will focus on helping companies meet compliance rather than punishing for failures to abide by new rules.
• For additional information on how the USMCA differs from NAFTA, see our January 2020 Spotlight.

What are people saying?

• At a July 1 ceremony commemorating the launch of the USMCA, President Donald Trump described the deal as “the largest, fairest, and most balanced trade agreement ever negotiated” and “a tremendous victory for our manufacturers and autoworkers…”
• In response to domestic criticisms citing Mexico’s limited achievements in the USMCA and Mexican President Andrés Manuel López Obrador’s planned visit to the U.S. two days later, on July 6, President López Obrador stated “If we have a good relationship with the United States government, we’ll avoid ill treatment, and little by little we’ve achieved this…It’s not the same treatment as before.”
• On June 17, in testimony before the U.S. House Ways and Means Committee Hearing on Trade Policy, Robert E. Lighthizer, the United States Trade Representative, acknowledged that there are many issues within the trade agreement still to be resolved but that his agency would act “early and often” to combat violations.
• In response to Lighthizer’s comments, Canadian Deputy Prime Minister Chrystia Freeland stated later on June 17, “We are good at following the rules and we believe in doing that. And we’re also good at standing up for our national interest and we’ll do that, too.”
• On June 30, Senator Chuck Grassley (R-IA) also reiterated the need for compliance, stating “We must now monitor enforcement and compliance with both partners to ensure that they live up to their commitments. I’m sure they’re going to be monitoring the United States to make sure we live up to it.”

What’s next?

• A bilateral summit between President Trump and President López Obrador has been planned for July 8-9 to commemorate the implementation of the new trade deal. On July 6, Canadian Prime Minister Justin Trudeau, who appeared to have been invited as an afterthought, stated that he was declining the invitation in response to the ongoing COVID-19 pandemic and threats of new U.S. tariffs on aluminum. President López Obrador is expected to attend, making his first visit to the United States since taking office in December 2018.
• Last year, the Mexican government passed a broad labor regulation law to prepare for new compliance measures in the USMCA. These regulations have come under fire and are facing numerous legal challenges awaiting response in the Mexican Supreme Court. If the Court rules the labor law unconstitutional, the country could be in violation of a significant portion of the USMCA and could face retaliatory actions from the U.S. and Canada.
• The implementation process will continue to be enacted in the coming years. However, the sunset clause requires the countries to review status of the agreement after six years which means the next opportunity for a major readjustment likely will not be until 2026.

April 2020

By Diane Thomas and Malgorzata Matowska

With governments around the globe facing an unprecedented health crisis, there is a broad consensus that the world has crossed into uncharted economic territory. In the EU, measures taken by member states have been the first line of defense against the virus’ spread. France’s unprecedented stimulus package shows how committed individual governments are to prevent economic collapse. In addition, contrary to some national statements that “Europe has let us down”, European institutions have also reacted strongly to the crisis, learning some lessons from the previous economic and financial crisis.

France’s unprecedented stimulus package

Following Emmanuel Macron’s martial speech on March 17, the French Government, backed by Parliament, passed a €45 billion stimulus package. This includes a postponement of €32 billion worth in taxes and payroll charges for companies. A further €8.5 billion have been released to finance the steep increase in part-time employment. Besides, an exceptional system of public guarantees worth €300 billion has been set up to ensure that banks continue to lend to businesses and support their cash flow. Healthcare spending has been increased by €2 billion to meet the critical need for medical equipment and to alleviate the pressure on healthcare personnel. A state of health emergency has also been officially declared.

In addition, to protect France's ambition to become a global hub for startups, the government has set up a €4 billion emergency fund to support its tech sector. The fund enables startups to benefit from specific measures, in addition to the ones already available to all companies. Startups in France will benefit from finance bridges between two fund-raising rounds, be eligible for State-guaranteed treasury loans, and benefit from accelerated procedures for public funding.

Industry involved with the “war effort”

In an announcement on March 29, Macron highlighted the role played by industry in the fight against COVID-19. In the following days, he welcomed efforts by a French industrial consortium that have committed to produce more respirators to meet the rising demand. He also stated his intention to increase the production of strategic items on the French territory, with a stated objective of full independence from mask imports by the end of 2020. For now, France remains exposed to fierce international competition when looking for suppliers for the billions of masks it so direly needs. 

The French government has closely involved industry in the effort to combat COVID-19 since the beginning of the health crisis. Weekly calls take place between ministerial cabinets and key players in every sector of activity. The French Minister for the Economy has underlined the administration’s resolve to save the French productive apparatus and to avoid a complete suspension of economic activity. The government also announced measures for sectors particularly affected by the crisis. For instance, airline companies will benefit from a relief on certain taxes and charges specific to air transport whose repayment will be spread over the next 3 years.

The European Commission steps in

Member states such as France are not alone in their struggle against COVID-19. European institutions, most notably the Commission, have launched several initiatives to reinforce public health sectors and mitigate the socio-economic impact of the crisis in the EU.

To support member states’ health sectors, the Commission created RescEU, a strategic stockpile of medical equipment that will be used to alleviate national shortages. In addition, under the Joint Procurement Agreement, member states are coordinating their purchases of items necessary for coronavirus testing. According to the Commission, this coordinated approach aims at giving member states “a strong position during their negotiations with industry on availability and price of medical products”. The EU is also putting €140 million into research projects on testing, treatment, and the search for a vaccine.

In addition to these healthcare-related measures, the Commission has also tabled a number of proposals aimed at mitigating the socioeconomic impact of the crisis. The European executive is relaxing EU budgetary rules, including its vital “3% maximum budget deficit” rule, to allow national governments to adequately finance their healthcare systems and businesses. The Commission has also set up a €37 billion Coronavirus Response Investment Initiative to provide liquidity to small businesses and to the health care sector, and simplified its State Aid rules, thus enabling faster approval of all national COVID-19 related measures. To protect critical European assets and technology, the Commission issued guidelines to help Member States better screen foreign direct investments into strategic sectors. 

Furthermore, Brussels has decided to provide sector-specific support to, among others, agriculture, fisheries and airlines. With regard to the latter, to keep essential transport flowing, the Commission has suspended a requirement that airlines operate a certain amount of flights to keep their airport slots and is encouraging member states to support air cargo operations during the crisis. Beyond the Commission, the European Central Bank’s Governing Council has added a Pandemic Emergency Purchase Programme worth €750 billion to the previously announced €120 billion plan. 

More measures on the table

Head of the Commission Von der Leyen has already announced that her institution will put its upcoming budget “at the heart of (our) efforts” to fight the coronavirus and proposed a corona-virus driven stimulus package as part of that budget.

In addition, members of the euro area, informally referred to as the “Eurogroup” are discussing more measures. The first would be a €100 billion reinsurance program for national unemployment schemes. The European funds should become available once member states offer at least €25 billion worth of guarantees. The second measure would be to earmark loans worth €240 billion from the European Stability Mechanism, a €400 billion bailout fund, for countries most affected by the virus. Whereas loans from this fund are usually conditional upon recipient countries implementing structural reforms, several countries seems to be inclined to lighten those conditions. German Federal Minister of Finance opened the door to a softening of his position, declaring: “The funds must not come with any unnecessary conditions attached”. Finally, the European Investment Bank needs member states to contribute an extra €25 billion to set up an extra €200 billion in loans to European companies. The Eurogroup has so far been unable to agree on these measures but will meet again on Thursday 9 April.

Commissioners Breton and Gentiloni called for a 4^th pillar of support through a purpose-built European fund that could issue long-term bonds, informally referred to as “coronabonds”. However, some member states remain opposed to the creation of a common debt instrument. As an alternative, France is pushing the idea of a temporary EU fund to help Europe through the economic slump caused by the virus. In addition to all these intiatives, head of the Commission Von der Leyen, Spain’s PM, and the Eurogroup’s president have all called for a new Marshall Plan.

What comes next?

What will it take to reboot the economy? The French Minister for Public Action has already signaled that a new finance bill could be the right vehicle to finance an “exit from the crisis”. However, the European Internal Market Commissioner assesses that Europe’s post-coronavirus recovery would cost €1.6 trillion, an amount that far exceeds both the European Stability Mechanism bailout fund and the ECB’s generous envelope. Last but not least, the intensity with which the health crisis is already hitting the United States, the EU’s largest trading partner, suggests that the bloc may have to further ramp up its effort to find a road back to economic and financial stability.

UPDATED: April 10, 2020

• France. On March 9, 2020, the Minister of Economy and Finance and the Minister of Action and Public accounts have announced an increase of the stimulus package which will amount to €100 billion instead of the initial €45 billion. It will be composed of €35 billion of budgetary measures, among which €20 billion for part-time employment, €7 billion for health expenditure (of which €4 billion for the purchase of health equipment). With regard to the future recovery plan, they mentioned specific plans for tourism, aeronautics or the automotive industry given the massive impact of the crisis on their activity.
  
  
• European Union. The Eurogroup meeting of April 9, 2020 has made the situation evolve with regard to the crisis management plan and a potential recovery plan. The Finance Ministers of European Union have reached a compromise to trigger the three above mentioned instruments to help member states face the COVID-19 crisis: a European Stability Mechanism credit line (up to €240 billion), a pan-European guarantee fund hosted by the European Investment Bank (€200 billion), and the SURE instrument to support national unemployment schemes (€100 billion). The ESM instrument will be accessible to each state, up to 2% of its GDP. The Eurogroup also “agreed to work on a Recovery Fund to prepare and support the recovery”. Such a fund would be “temporary, targeted and commensurate with the extraordinary costs of the current crisis”. The outlines of such a fund are still to be discussed by government leaders during the next European Council meeting on April 23.

April 2020

By Sally A. Painter and Pero Jolevski 

On March 27, North Macedonia became NATO’s 30th member. A few days earlier, EU member states approved the start of EU membership talks with the country. These two developments mark a crucial milestone for the Alliance in this era of Transatlantic skepticism—particularly after the historic failure of the 2008 Bucharest NATO Summit when North Macedonia’s accession was vetoed and Georgia and Ukraine’s Membership Action Plans (MAP) were rejected.

North Macedonia’s long lasting Transatlantic accessions finally came to an end after the country’s two decade dispute with Greece over the “name issue” was resolved when the two countries signed the “Prespa” agreement.

In Brussels, NATO Secretary General Jens Stoltenberg presided over the ceremonial accession of North Macedonia to the Alliance, saying, “I welcome the support from several NATO Allies to our newest member. This is Allied solidarity in action. Thirty flags will now fly together, a symbol of our unity and our solidarity."

While nations struggle in the fight against the global COVID-19 pandemic, NATO is determined to continue playing its part in supporting these efforts. Secretary General Stoltenberg noted that NATO Defense Ministers have met in an extraordinary video conference session to discuss how NATO can support civilian efforts in the fight against the pandemic.

Recently, NATO Secretary General Jens Stoltenberg appointed a group of experts to study ways to further strengthen the political dimension of the Alliance, as was agreed during the leaders’ meeting in London last year. Turkey's Ambassador, Tacan Ildem, who currently serves as NATO’s Assistant Secretary General for Public Diplomacy, will be among the group of five male and five female experts from other NATO countries.

The group “will offer recommendations to reinforce the Alliance’s unity, increase political consultation and coordination between Allies, and strengthen NATO’s political role,” noted a NATO statement. Additionally, “the group will engage with Allied capitals and the North Atlantic Council, NATO’s decision making body, and other relevant stakeholders,” it added.

Thomas de Maiziere, member of the German Bundestag and former German defense minister together with Wess Mitchell, former U.S Assistant Secretary of State for European Affairs will chair the group. Poland is the only new NATO member country represented, leaving out all Baltic and Balkan members.

With respect to the European Union, Ministers of Foreign Affairs from EU member states met on March 24 by video conference and approved the start of EU membership talks with both North Macedonia and Albania. Germany's State Secretary for European Affairs Michael Roth called the decision "good news in these gloomy times."

In the midst of a global pandemic, the UK leaving the European Union, the France-led resistance to defer starting EU talks for new member states, and the U.S. ambivalence towards NATO, these new developments are an inspiring sign of the strength of the EU and Transatlantic partnership and their vision of a united Europe, “whole and free.”

March 2020

By Karen A. Tramontano

In the last few days we watched one of the Democratic Party’s presidential candidates — Joe Biden, then well behind in delegates and counted out by most pundits — win more delegates than any other candidate in the race, including the previously presumed frontrunner, Senator Bernie Sanders. The question now is: who will be the Democrats’ nominee to challenge President Trump?

There have been many articles analyzing why former Vice President Biden won a huge victory in South Carolina’s primary, followed by winning 10 out of 14 state contests on Super Tuesday on March 3. That will not be the subject of this article. Instead, we will try to explain the somewhat complicated process by which a candidate is allocated delegates.*

While delegates continue to be counted in California and in Washington (state), Biden leads Sanders in delegates 857 to 709. Former Mayor Michael Bloomberg, former Mayor Pete Buttigieg, Senator Amy Klobuchar, Senator Kamala Harris, and Andrew Yang have each suspended their campaigns and have endorsed Biden. Senator Elizabeth Warren has also announced she is suspending her campaign, although she has yet to endorse a candidate.

The Magic Number

As of March 11, 1,697 delegates have been declared, pledged to candidates representing 46% of the delegates to be selected. To win the nomination, a candidate must win as many states as possible by the highest percentage possible to accumulate the most “pledged delegates.” Pledged delegates vote for the nominee to whom they are pledged at the Democratic National Convention in July.

The key number of delegates to reach is 1,991: half the total number of delegates (3,979) + 1. The number of delegates a candidate is allocated after each state and territory contest is based on a formula determined in advance by the Democratic National Committee. This formula assigns delegates to states and territories based on population, the relative strength of the Democratic Party in the state or territory, and the timing of the primary. States that hold primaries or caucuses later in the process are awarded bonus delegates as are states that agree to hold their primaries on the same day as other primaries. The delegates assigned to states are not related to the Electoral College.

To be allocated delegates, a candidate must have at least 15% of those votes cast in the state’s primary (or caucus). If candidates do not receive 15% of the votes cast, they receive no (0) delegates. If candidates receive 15% or more of the votes cast, they will receive delegates. Delegates are not allocated based on winning the state or territory. Instead, one-fourth of the delegates are awarded based on the state-wide (or territory) vote. Three-fourths are awarded based on the results in congressional districts within the state.

The Democratic Party’s primary process is not “winner take all.” Only if no candidate achieves 15% of the votes cast does a candidate “win” the state outright. In most contests, the two remaining candidates would receive at least 15% of the votes, resulting in each candidate being allocated delegates based on the population and district formula.

In the upcoming primaries, candidates must be strategic not only about choosing the states where they believe they can win, but also in focusing their efforts in states where they believe their opponent may not be able to reach 15%. For a candidate to maintain a lead — which former Vice President Biden currently has — he not only has to win the majority of votes in a state’s contest, but he also has to win by a “landslide.”. Only then would he be allocated the largest proportion of the state’s delegates. The remaining candidates — Biden and Sanders —will continue to accumulate delegates if they receive 15% of the votes cast. Not having a “winner take all” process makes it difficult in a tight race for either candidate to reach a majority — 1,991 — of delegates.

Remaining Primary Contests

On March 10, former Vice President Biden received the most primary votes cast in Michigan, Missouri, Mississippi, and Idaho. Senator Sanders won the caucus in North Dakota. As of March 11, Washington (state) is continuing to count votes and it is too close to declare a winner; with 67% of the votes counted, Sanders leads Biden 32.7% to 32.5%. 

Primaries in Arizona, Florida, Illinois, and Ohio will be held on March 17. On April 4 primaries will be held in Alaska, Hawaii, Louisiana, and Wyoming followed by primaries on April 7 in Wisconsin. On April 28, primaries will be held in delegate-rich New York and Pennsylvania as well as in Connecticut, Delaware, Maryland, and Rhode Island. Contests in Kansas (May 2), Indiana (May 5), Nebraska and West Virginia (May 12), and Kentucky and Oregon (May 19) will follow.

The final primaries will take place on June 2 in New Jersey, Montana, New Mexico, South Dakota, and the District of Columbia. After March 17, 60% of the delegates will have been allocated to candidates. After April 28, 90% of delegates will have been allocated.

Convention to Select Nominee

The 2020 Democratic National Convention will be held in Milwaukee, Wisconsin from July 13 – 16. The number of delegates pledged to a candidate will be known before the Convention convenes. The Convention will hold a first ballot allowing delegates to officially vote for the nominee to whom they are pledged. Changes adopted after the 2016 election allow only pledged delegates to vote on the first ballot.

One might ask, what happens to Buttigieg’s, Klobuchar’s, and Bloomberg’s pledged delegates? The answer is complicated.

One-fourth of the delegates awarded are based on the state’s population. These statewide allocations are reapportioned based on the state’s initial allocation. For example, Buttigieg won 14 delegates. One-fourth of his delegates are statewide, and those delegates will be reapportioned between Sanders, who came in 2nd, and Biden, who came in 4th but reached the 15% threshold. Three-fourths of Buttigieg’s delegates in Iowa are district delegates who are released from their pledge. Even though Buttigieg, Klobuchar, and Bloomberg endorsed Biden, their “pledged” district delegates could vote for either Biden or Sanders. The rules regarding reapportioning delegates and once “pledged” but now “released” delegates could become very important if neither candidate receives 1,991 on the first ballot.

If no candidate receives 1,991 delegates, the Convention will go to a second ballot. If a second ballot is held, all formerly pledged delegates are released and can vote for any candidate. On the second ballot, to become a nominee a candidate must receive a majority of those voting or 2,375.5. The number has increased because 771 “superdelegates” are allowed to vote on the second ballot thereby increasing the number of votes casts. “Superdelegates” are delegates not chosen by the primaries but awarded “superdelegate status” because they are leaders in the Democratic Party, Members of Congress, Governors, Mayors, former Presidents, and local party leaders. Throughout the process, candidates for the nomination court the support of superdelegates, who typically publicly announce in advance of the Convention the candidate they are supporting.

What Happens Next?

Currently, the race between former Vice President Biden and Senator Sanders is close — the gap is less than 200 delegates. With less than 50% of the delegates allocated, an upcoming debate on March 15, and primaries to be held in delegate-rich New York and Pennsylvania, anything can happen. Recall pundits weeks ago claimed that Biden was down and out and Senator Sanders was surging! In 72 hours all that changed after Biden’s huge victory in South Carolina. While it will be difficult, Senator Sanders could close the gap. The upcoming primary contests are vitally important to each candidate. Biden must maintain his momentum and have a good debate performance, while Sanders must increase voter turnout and expand his coalition if he is to achieve a greater number of delegates to close the gap in the upcoming primaries. While it looks less likely that 771 superdelegates could determine the outcome of the nomination on a potential second ballot, the prospect of a second ballot remains a reality.

For those who want to know who the nominee is likely to be, the answer is: watch the results of the upcoming races and keep track of the delegates awarded after each contest. Pundits are predicting the outcome will be clear by April, but those very same pundits thought Sanders was the likely nominee. Now they believe it will be Biden.

If it continues to be close and neither candidate reaches 1,991 delegates, the nominee may be determined on a second ballot at the Democratic National Convention in July, something that has not occurred since 1952.

* In American politics, “delegates” — representing the results of U.S. states’ primary election contests — collectively decide which candidate the party will eventually run for the presidency.

March 2020

By Daniel P. Erikson

By all accounts, 2019 was a challenging economic year for Latin America. Stalled growth in the largest economies of Brazil and Mexico, together with recession in Argentina, hyperinflation and economic collapse in Venezuela, and growing social unrest in countries as diverse as Bolivia, Chile, and Haiti all added up to a bleak regional panorama. In December, the UN Economic Commission announced that the period from 2014 to 2020 was the lowest period for economic growth in Latin America in past seven decades, clocking in a GDP growth rate of 0.1% in 2019.

Will 2020 be any better? At best, the evidence is mixed, and specter of the coronavirus epidemic handcuffing economic growth in the United States and Europe will have significant impacts in Latin America that will be further intensified if the pandemic overtakes the fragile health systems in the region. This week the Inter-American Development Bank announced that it will be postponing its annual meeting that was scheduled to take place next week in Colombia. With Argentina reporting the first death from coronavirus in Latin America over the weekend, the decision seems prescient. At a minimum, the global decline in tourism will affect a range of economies and the slowdown in China and the U.S. will further complicate the economic picture.

However, Latin America was already in trouble long before the coronavirus arrived. In late January, the International Monetary Fund identified the region’s challenges stemming from both structural and cyclical factors – where chronic factors like low investment and productivity are coinciding with a period of depressed commodity prices and social unrest. However, even the modest IMF projections for Latin America of 1.6% growth in 2020 and 2.3% growth in 2021 may soon look wildly rosy if the global economic slowdown continues. As a result, Latin America’s economic policymakers will be charged with managing the downside risks posed by the global economy while intensifying efforts to boost productivity and enact long-delayed fiscal reforms.

Several countries like Colombia, the Dominican Republic and Panama – not to mention the broader Caribbean and especially oil-rich Guyana – offer the possibility to achieve sustained economic growth in 2020 despite the strong headwinds. But all eyes will also be on the larger economies – especially Brazil, Mexico, and debt-ridden Argentina – to see how they navigate the choppy economic waters that surely lie ahead. With smart policies and political will, Latin America will be able to enact policies to ensure that the new decade far outpaces the economic performance of the 2010s.

By all appearances, the region will face a long, hard fight back to growth – but it is surely a fight worth having.