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The EU's Response to COVID-19 and International Relations

Yuichi Hosoya
Professor, Keio University

Introduction

European countries became the epicenter of the outbreak of COVID-19 from early March to mid-May 2020, and the number of infections and fatalities precipitously increased. In many European countries except Sweden, the governments resorted to lockdown (city blockade). As a result, the spread of infection slowed down, and from June various restrictions were gradually eased.

From March to April, amid the rapid spread of infection, the EU failed to take appropriate measures, and many member states "froze" the free movement of people stipulated by the Schengen Agreement and implemented immigration restrictions. Thus, the border control between the EU member states was temporarily restored. Although the border control terminated on June 15, the EU lost the trust of citizens of its member states and faced a significant crisis.

Table 1. The Current State of COVID-19 Infections in Europe

* Based on The New York Times data. Updated 05:52 July 10.

Faced with such a grave existential crisis, the EU has gradually provided more proactive cooperation for its member states and adopted crucial measures to address the coronavirus pandemic. With the rapid economic downturn since April, the EU has come up with various support programs to prevent the bankruptcy of many corporations and mass unemployment. Understandably, the economic growth of the EU as a whole in the current fiscal year is estimated to lose much momentum.

Meanwhile, the UK, which left the EU on January 31, 2020, is still in the transition period until December 31, 2020, and maintains almost the same status as the other EU member states. The UK did not take procedures to extend the transition period before June 30, while negotiations on the "future relations agreement" have also been in hiatus due to the corona crisis. The combination of the corona crisis and "no-deal Brexit" could make the UK suffer the gravest economic slowdown among major European countries. After leaving the EU, the UK fell into isolation without coordination with the EU member states in addressing the corona pandemic. Over the corona response, the EU and the UK have ended up following different paths. In the following, I would like to give an overview of corona countermeasures taken by the EU and the UK, bilateral negotiations regarding the future relations agreement, and the transition of international relations affected by the negotiations.

Table 2. Country-Wise Mobility and Other Restrictions in Europe

* JETRO, "COVID-19 Responses in Europe" (Access as of July 12, 2020)
https://www.jetro.go.jp/world/covid-19/europe/

1. From the Initial Confusion to Border Blockades

In the early stages of the rapid spread of COVID-19, each EU member state took a response prioritizing its benefits, which complicated coordination among them, and also promoted mutual distrust. Germany and France placed an embargo on the export of therapeutic goods to Italy facing a serious infection. The EU's unity was at stake.

Italian Prime Minister Giuseppe Conte, in a predicament, criticized the EU's response, saying, "The EU loses its raison d'être if it cannot stand up to this crisis."1 Italy is the first EU member state that participated in the "One Belt, One Road" initiative and has promoted economic relations with China. The current Italian government is led by the left-wing populist political party, "Five Star Movement," taking a critical position toward the EU. Italy exacerbated relations with the European Commission in Brussels and Germany during the European Refugee Crisis. Italy's anti-EU sentiment remains intact.

However, such confusion subsided in due course, and the self-centered behavior of the member states was gradually superseded by more cooperative policies. When the spread of infection at home abated to some extent, Germany assumed a more cooperative stance. She provided Italy with medical supplies and air-transported critically ill patients for treatment in Germany. Then the collapse of medical services took place in Italy. Similarly the EU began to offer a variety of programs to support its member states as well as SMEs and individuals in the EU region.

2. EU's Support Programs

Besides the existing measures to deal with the spread of infectious diseases, the EU worked out multiple support packages like new methods of financial support, and extended a helping hand to its member states fragile in terms of economy and in medical care. On December 1, 2019, German politician Ursula Gertrud von der Leyen assumed the office of president of the European Commission. It was soon after the von der Leyen regime started and before it got going that the spread of coronavirus infection took place. This partly accounts for the cause of delay and the confusion in the EU's initial response.

On March 10, 2020, the EU summit meeting on the control of the COVID-19 infection was held by video conferencing in response to the outbreak of infection in the member states. After the completion of the video conference, EC President von der Leyen revealed that the EC would prioritize the following two points. 2 First, the EC will hold a daily telephone conference with the ministers of health and home affairs of the EU member states to coordinate necessary measures. Second, the EC will convene a team of immunology and virology experts from EU member states to solicit guidance and advice to control the spread of COVID-19 in Europe. Based on these efforts, the EC will determine the status of production capacity and distribution regarding personal protective equipment (PPE) and ventilators and coordinate the supply of those resources. Furthermore, the EC has decided to support research efforts associated with COVID-19 and to provide public and private funds worth €140 million for the development of vaccines.

Furthermore, emphasizing the critical necessity of implementing macroeconomic measures, President von der Leyen said in a determined tone, "We will use all the tools at our disposal to make sure the European economy weathers this storm."3 Specifically, from mid-March onward, the EC utilized or newly created the following programs in rapid succession in an effort to take necessary measures.

(1) "EU Civil Protection Mechanism"

By using the existing framework "EU Civil Protection Mechanism," the EU was quick to allocate emergency support to where it is needed. The EU launched this framework in 2001 in order to provide prompt assistance in response to a severe natural disaster, terrorism, or to a nuclear disaster both inside and outside the EU region. Following the Great East Japan Earthquake in March 2011, the EU used this framework to provide relief supplies to Japan and dispatched personnel for emergency relief.

Following the spread of the outbreak of infection and the collapse of medical services between April and May, the EU used this framework and distributed 330,000 masks to Spain, Italy, and Croatia. Furthermore, on May 7, a part of 10 million masks the EU had acquired for emergency use was delivered to healthcare workers in 17 member states and the UK. Under this mechanism as well as the "rescEU" framework that started in 2019, the EU stockpiled supplies for enhancing its disaster response capacity, which served well this time. The EU's strategic distribution centers for joint stockpiling purposes in Romania and Germany also provided relief supplies to the member states in need. Besides the EU frameworks, medical supplies were provided bilaterally between member states, and effective measures were taken to prevent the spread of infection. 4

The EU jointly chartered an airplane to bring home EU citizens of six member states who had traveled on board the large cruise ship Diamond Princess that was berthed in Yokohama. France and Germany also jointly arranged a flight to take home 400 EU citizens from Wuhan, China --- as much as 75% of the cost incurred was funded by the EU budget. 5 In this way, the EU encountered many problems in the initial stage of response against COVID-19, but gradually implemented necessary action using the EU frameworks and became capable to take necessary measures to control the spread of infection. While the number of infections and fatalities increased in the US and in the UK, the EU member states succeeded in controlling the spread of COVID-19 at an earlier stage of infection.

(2) Coronavirus Response Investment Initiative Plus

The EU formulates "cohesion policies" to reduce economic disparities within the region. The new initiative named "Coronavirus Response Investment Initiative Plus (CRII+)" is a proposal to allow the member states to use the European Structural and Investment Funds (ESIF) --- the financial source of cohesion policies --- to implement necessary policy measures such as urgent rehabilitation programs for SMEs, partial unemployment allowances, and support for the medical sector. As a result, corporations and workers in the EU member states managed to flexibly use EU funds for emergency purposes, to avoid financial difficulties and unemployment due to economic lockdowns associated with the corona pandemic. 6

(3) "Pandemic Emergency Purchase Plan (PEPP)"

In March 2020, the EU announced a new proposal called the "Pandemic Emergency Purchase Plan," which enabled the European Central Bank (ECB) to invest a total of €1.35 trillion to purchase public and private sector bonds to stimulate consumption and investment. It is a concrete measure to protect the economy of the eurozone. It stipulates the flexible operation of various conventional systems to provide funds to corporations and organizations experiencing financial difficulties. Limited as its scale is, the PEPP is an urgent measure based on monetary policies that the ECB can implement at its discretion to a certain extent. 7

(4) "Team Europe"

On April 8, 2020, the EU decided to contribute €15.6 billion as necessary funds to provide swift assistance for partner countries to respond to the spread of the new coronavirus outbreak. It is a framework called "Team Europe," or an attempt to suppress the spread of infection in Europe by supporting not only the EU member states but also neighboring countries. "Partner countries" refer to such countries that are geographically close to and with intimate connections with the EU. They have built a particularly close relationship with the EU by employing various frameworks. Some of them want to join the EU in the future.

The "Team Europe" expanded in due course to €36 billion in value, and its specific allowances are appropriated to 1) imminent health crisis and humanitarian needs, 2) research, health, and water supply system, and 3) the mitigation of longer-term socio-economic implications. 8 Main targets are West Balkan countries, the EU Eastern countries, and Africa.

(5) "Temporary Support to Mitigate Unemployment Risks in Emergency (SURE)"

On May 19, 2020 the European Council adopted the "Temporary Support to Mitigate Unemployment Risks in Emergency (SURE)" as a more powerful measure to protect the economy and employment in the EU. This is a loan of up to €100 billion from the EU to its member states and is a program to prevent and mitigate the risks of unemployment of EU citizens and corporate failures. It is, so to speak, the EU version of a temporary general unemployment insurance in response to the corona crisis. 9

Specifically, the SURE's broad range of support measures include 1) the protection of corporations with the support of the European Investment Bank (EIB), 2) the protection of national budgets with the support of the European Stability Mechanism (ESM), and 3) the protection of employment and workers by means of temporary grants controlled by the European Commission. Thus, the SURE is designed to prevent corporate failures and the unemployment of EU citizens.

EC President Ursula von der Leyen remarked, "In this coronavirus crisis, only the strongest of responses will do. We must use every means at our disposal. …every rule will be eased to enable the funding to flow rapidly and effectively… (and) to keep people in jobs and businesses running. With this, we are joining forces with Member States to save lives and protect livelihoods. This is European solidarity." She thus emphasized the goal of the SURE, which started its actual operation on June 1.

The EU had previously planned for the European version of a general unemployment insurance system, which, however, did not become a reality due to irreconcilable differences in the positions of the member states. The SURE has urgently preponed the program as a measure against the COVID-19 infection. It is just an emergency measure to contend with the corona crisis; its purpose and duration are limited. The SURE will not stand in the way of the permanent institutionalization in the future of the European version of an unemployment reinsurance scheme; in a sense, it is a precursor of such a scheme. The SURE proves the strong solidarity between the EU and its member states to safeguard the employment of European citizens and businesses in the EU region. 10

(6) Coronavirus Recovery Fund

On May 18, 2020, the German and French leaders reached an agreement, and, on the 27th of the same month, EC President von der Leyen proposed the establishment of a corona virus recovery fund worth €750 billion (about JPY90 trillion). The EU member states share the monetary policy but have difficulties in financial integration. The proposal is a groundbreaking attempt to create a common fiscal policy.

The EU summit held by video conferencing on June 19, however, did not reach an agreement on the proposal. From an early date, French President Macron advocated fiscal integration in the EU, whereas German Chancellor Merkel opposed the issuance of joint EU bonds and the "frugal four" countries emphasizing fiscal discipline --- the Netherlands, Austria, Denmark, and Sweden --- have also resisted such movement. But in the face of the grave EU crisis, Merkel changed her position and acknowledged the necessity of fiscal integration. However, a fierce confrontation ensued among the member states over the breakdown between subsidies that do not have to be repaid and loans that need to be repaid. "We know it's a difficult negotiation, but it's time to decide on the future of Europe," said Charles Michel, the Permanent President of the European Council, calling on the member states for mutual concessions. 11

The EU summit meeting on July 17-18 reached no agreement. Negotiations continued, and finally, an agreement was reached early on the morning of July 21. The unusually long negotiations lasted five days. The importance of reaching the agreement was great. French President Macron tweeted, saying, "It's a historic day for Europe," and President of the European Council Michel also remarked with glee, "It will be long remembered as a crucial moment," at the press conference shortly after the meeting ended. 12 Thus, significant progress advanced in the EU's financial integration, which had been a long-standing concern. The EU's economic policy comprises two pillars --- monetary policy and fiscal policy, over the former of which the EU alone has the authority, whereas the member states have authority over the latter. The effective coordination of monetary and fiscal policies would enable the EU to realize a powerful economic policy.

Ironically, the UK's departure from the EU on January 31 opened the way for such a groundbreaking agreement, for until then, the UK had adamantly resisted the strengthening of the EU's power. In the face of the UK's departure and unprecedented difficulties caused by the corona crisis, the EU has gained incentives to move forward.

(7) "The European Green Deal"

Acutely hit by the corona pandemic, the EU proposed a "green recovery" and publicized its intention to place environmental problems at the heart of corona recovery efforts. The EU aims at achieving economic recovery through the innovation of environmental protection measures. Specifically, the "plans for the energy system of the future and clean hydrogen" released by the European Commission on July 8 states, "The EU strategies for energy system integration and hydrogen, adopted today, will pave the way towards a more efficient and interconnected energy sector, driven by the twin goals of a cleaner planet and a stronger economy." Following these strategies, the EU will endeavor to reduce greenhouse gas emissions in the EU region to virtually zero by 2050. These strategies are based on a basic guideline for achieving both environmental protection and economic growth released on December 11, 2019 ("Communication of the European Commission on the European Green Deal"). 13

Thus, regarding recovery from the corona crisis, the EU holds a unique philosophy different from that of the United States or China. Surmounting many difficulties, the EU is in the process of restoring unity in its region.

3. Negotiations on Brexit

(1) Why the UK left the EU?

Although the EU stumbled in its initial response to the corona crisis and lost the trust of citizens of the EU member states, it presented a succession of new initiatives from mid-March, taking effective measures to prevent the spread of infection, the bankruptcy of corporations, and massive unemployment. Those measures are fraught with limitations, but it is a crucial step forward that the EU has initiated fiscal integration by reaching an agreement on July 21 on the coronavirus recovery fund that was considered difficult to launch.

On the other hand, the UK is currently in a predicament. At this moment, negotiations between the UK and the EU on the "future relations agreement" that is to stipulate bilateral relations have been in hiatus. Given the end of the transition period on December 31, the UK is highly likely to face a momentous crisis of a "no-deal Brexit." To avoid such confusion and chaos, negotiations are still underway between the UK and the EU.

I would like to briefly review developments surrounding Brexit since October last year. A draft withdrawal agreement between the UK and the EU, which came into existence after great difficulties, was agreed upon by Prime Minister Johnson on October 17, 2019. Based on the agreement, the departure of the UK from the EU was put into motion. As a result of the December 12 House of Commons elections where the Conservatives won with a large majority, Prime Minister Johnson will be able to dominate the majority, ignoring opposition elements critical of the draft withdrawal agreement.

Table 3. A Chronology of Brexit Negotiations

After leaving the EU, the UK government started negotiations to conclude "future relationship agreements" focusing on a free trade agreement (FTA) between the UK and the EU. Both the UK and the EU respectively announced a basic negotiation policy in February, but their positions were poles apart. Negotiations were expected to be difficult from the outset.

After the introductory meeting of the first round of negotiations, the EU's chief negotiator Michel Barnier stated his acknowledgment that the relationship between the two parties would no longer be ‘as before,' saying, "I have an impression that these final changes and the accompanying problems are downplayed." He outlined the following prospects for a serious situation: First, from January 2021, customs clearance procedures will be mandatory for all imports from and exports to the UK. Second, financial institutions established in the UK will automatically lose the validity of their financial passports from the same date. Third, motorcars and industrial products, as well as medical equipment, manufactured based on permits and certificates issued by the UK authorities will not be allowed to circulate in the EU markets.

Any of the above three points will have a huge impact on the foreign trade of the UK, about half of which is accounted for by trade with the EU. However, ministers in the current Johnson administration, who are pro-secession hardliners, stick to their position that they will rather accept a "no-deal Brexit" if they are coerced into making concessions to the EU. Their attitude constitutes the main concern for indigenous British corporations and for Japanese corporations operating businesses in the UK, whose transactions with the EU markets account for a large proportion of their business.

(2) The Procrastination of the Negotiation Schedule Due to the Corona Crisis

Following the UK's departure from the EU, the UK-EU negotiations began with a schedule from March 2, 2020 through June 2020 over the bilateral "future relationship agreements," including an FTA. Given the time necessary for ratification, the negotiations aim to reach a general agreement before the European Council meeting on June 18-19 and a final agreement before the same meeting in September. However, since the time for negotiations is too short, it is unrealistic for either of the parties to reach vital agreements. The negotiations started when the corona pandemic had not yet emerged as a serious concern.

Table 4. The Timeline of Negotiations on the UK-EU Future Relationship Agreements

Since the first round of the UK-EU negotiations began on March 2, 2020, the infection of COVID-19 has spread rapidly in Europe. The EU chief negotiator Michel Barnier was infected with the coronavirus, while the UK negotiator David Frost isolated himself at home due to the symptoms of the infection. Thus, negotiations were significantly delayed.

At the end of March, Prime Minister Johnson himself was infected with the coronavirus and was admitted to St. Thomas Hospital in London on April 5. He moved to an intensive care unit (ICU) the next day. The British government worked out a "plan for contingencies," and Foreign Secretary Dominique Raab took over the leadership of the UK government. Since the Prime Minister himself was infected, he could not decide on the UK government's response to negotiations on future relations, or on guidelines to control COVID-19 infections. The Brexit negotiation also stagnated, and the UK faced a political crisis.

The European Union (Withdrawal Agreement) Act 2020, which was enacted in January, stipulates that the UK should not postpone relevant negotiations with the EU. Despite the domestic turmoil caused by the corona crisis, Prime Minister Johnson repeated that he intended to comply with the stipulation. However, the corona crisis significantly changed the original timeline the UK government had prepared. Nevertheless, after the completion of the UK-EU summit meeting held by video conferencing on June 15 between Prime Minister Johnson, EC President Ursula von der Leyen, and Permanent President of the European Council Charles Michel, the parties concerned issued a joint statement, which confirmed that the transition period should, as scheduled, end on December 31, 2020, with no extension.

The negotiations over future relationship agreements came to a standstill because both parties did not make any concessions. The EU chief negotiator Barnier criticized the UK, saying, "The UK refused to work earnestly on some basic issues." He also accused the attitude of the UK government attempting to accelerate talks amid the outbreak of COVID-19 infection as being "far apart and even unrealistic." The UK chief negotiator Frost, on the other hand, objected to the EU's intention to apply EU rules to the post-Brexit UK by using the concept of "Level Playing Field (LPF)."

At this moment, the point of compromise is still invisible, and there is a likelihood that "no-deal Brexit" will become a reality.

(3) Crucial Issues in the UK-EU Negotiations

There are some prime obstacles in the UK-EU negotiations. The divergence of their views is quite significant. The following are the overriding issues.

1) "Level Playing Field"

The EU argues that the UK should respect the "Level Playing Field" stated in paragraph 77 of the "Political Declaration" agreed upon on October 17, 2019. Over the question of the LPF, the friction between the UK and the EU deepened.

The EU defines "Level Playing Field" as the ensuring of fair conditions to achieve open and fair competition, taking into account the geographical proximity and economic interdependence between the EU and the UK. The LPF demands that after the transition period, the UK should comply with high levels, currently in the EU, in areas such as government subsidies, competition law, social and employment regulations, environmental standards, climate change, and taxation. This is because if the UK conducts economic activities in areas neighboring the EU region under conditions that are significantly different from those in the EU, the EU will suffer competitive disadvantages. The EU demands it as a prerequisite for an FTA between the UK and the EU that the UK should continue complying with such environmental and labor standards in practice in the EU. Otherwise, the EU will not agree upon an FTA with the UK.

The UK government earlier accepted such EU demands that are incorporated in the "Political Declaration." Therefore, the UK's refusal at the last minute of those demands lack cogency. However, there is strong resistance in the UK against the fact that the European Court of Justice (ECJ) alone has the authority to make judgments as to whether the UK properly complies with the "Level Playing Field." The pro-secession hardliners in the UK are vehemently opposing the LPF, warning that the UK should not be under the supervision of EU rules.

2) "Total Customs Duty Exemption"

Another obstacle to the UK-EU negotiations is the UK government's claim for "Total Customs Duty Exemption." What does this mean?

At the current pace of negotiations, it will be virtually impossible for the parties concerned to reach a consensus by the end of the year, partly due to the influence of the corona crisis. Under such circumstances, in order to simplify talks and shorten the negotiation time, the UK government "copies and pastes" provisions of the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU and the Japan-EU EPA, and demands a tariff-free FTA with no exceptional items. Talks over exceptional items, once launched, would require a long period of negotiations as was the case in the past, and it will be quite difficult to conclude the current negotiations and to complete ratification by the end of the year. The UK's clear intention is to achieve nominal results by the year end and to reach an agreement in principle by shelving vital issues.

Unsurprisingly, the EU criticizes the UK for "copying and pasting" FTAs the EU has concluded with third countries for use to formulate an agreement with it. The EU argues that the contents of the agreements that it concluded with Canada and Japan through negotiations cannot be applied as they are to an agreement with the UK. It is quite a reasonable assertion. But if that is the case, it will be quite difficult to conclude the ongoing negotiations within the year, and both parties should discover a compromise acceptable to each other. Although it may be a hard path, it will not be impossible for them to manage to craft some formal agreement in principle. The grave problem is the absence of trust between them.

Conclusion

The EU member states formulate and implement countermeasures at home against COVID-19 infections. The EU Civil Protection Mechanism provided the member states running short of therapeutic goods like masks with necessary supplies. Unfortunately, the member states' initial responses were not without confusion and self-centered tendencies.

The recovery process in the EU following the spread of COVID-19 is a manifestation of its solidarity, unity, and joint action --- symbolized by fiscal integration. The UK that has left the EU does not participate in the process. The UK economy is likely to worsen due to the impact of the corona crisis and an imminent "no-deal Brexit," and there is concern that the UK's international influence will decline.

Not surprisingly, as a result, the Commonwealth, including the UK, has become more important for Japan than ever. It includes liberal democratic countries that share values with Japan, such as the UK, Australia, New Zealand, and Canada, and it is economically building close relationships with Japan through free trade agreements.

Today's international relations are greatly influenced by the intentions of the two major powers, the United States and China, and the US-China relationship occupies the centric position in international relations. The EU is facing an economic crisis due to devastating damage from the corona pandemic and Brexit. However, the EU member states are determined to overcome such a crisis by clearing the previously difficult hurdle of financial integration. How effective it will be will be determined by future negotiations and agreements.

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