December 31, 2020

Progress on the Covid-19 vaccines, including the UK approval of the Oxford-AstraZeneca vaccine on December 30, has helped improve the global economic outlook for 2021. Most economists believe we will see global growth between 4% and 5% in 2021, with the United States at about 4% according to the U.S. Federal Reserve. The rollout of the coronavirus vaccines in the United States and around the world will inevitably dictate the pace of recovery, but immunologists believe the approval of the Oxford-AstraZeneca vaccine could be a game-changer – particularly in emerging markets. While clinical trials indicated that the Oxford-AstraZeneca vaccine has only 70% efficacy compared to 95% for the Pfizer and Moderna vaccines, it is substantially cheaper (at $3 or $4) and easier to transport, handle, and store. The UK is the first to authorize its use and India, Argentina, Brazil, and South Africa could soon follow, allowing for vaccinations across large swaths of the globe and, in turn, fueling the global economic recovery. Good news on the vaccine front along with increased government spending, like the U.S. Covid Relief bill signed into law by President Trump on December 27, will help stave off the worst of the economic damage from 2020 and a difficult first quarter in 2021 still to come. The Organization for Economic Cooperation and Development (OECD), which said the early economic impacts of Covid-19 were 10x those experienced in the first months of the 2008 global financial crisis, forecasts global economic growth will average about 4% over the next two years but that economic recovery will be uneven across the globe. More optimistic, however, economists with Morgan Stanley see global growth closer to 5% in 2021, with all geographies and sectors joining the global economic recovery by March or April thanks to the rollout of the vaccines.

The British Parliament passed the trade deal between Britain and the European Union in a vote of 521 to 73, making this the final step in the long slog to realize the Brexit vote of June 2016. The trade deal, passed on December 30, establishes the economic relationship between Britain and the European Union going forward and, with just one day to spare, helped avoid the potential chaos of a “no-deal” Brexit. This is a huge win for British Prime Minister Boris Johnson, who has been negotiating the terms of the deal with the EU while also leading the UK’s response to the coronavirus pandemic over the past year. The deal provides Britain tariff-free access to European markets, but in accordance with the Brexit promise, Britain will no longer be a member of the European Union’s single market and customs union. Britain left the EU politically last January but had remained under existing EU economic rules for 2020, in a transition period during which Johnson negotiated with European Commission President Ursula von der Leyen to sever Britain from economic integration with the EU. Johnson has long argued that the short-term economic pain of Brexit will be worth the sovereignty and economic independence gained in the long-term. Brexit skeptics in the Labour Party ultimately voted with Johnson’s Conservative Party to pass the bill, recognizing that in the midst of a pandemic, a “thin deal” would be better than the potential catastrophe of a “no-deal.” The pros and cons of Brexit are sure to be debated for years to come, but at least for now, Britain and the EU can put Brexit to bed.

The recent cyberattacks on the U.S. government by Russian hackers present an immediate national security challenge for the incoming Biden administration. While President Trump has doubted the role of Russia in the SolarWinds hack, President-elect Biden is likely to take a harder line on Russian President Vladimir Putin. The hackers, believed to be part of Russia’s foreign intelligence service (SVR), subverted SolarWinds software to penetrate U.S. government and private sector networks with the apparent objective of gaining access to their data. The extent of the hack is still not fully known, and this will need to be a focus of the incoming administration as it fortifies the U.S. government’s defense systems. At the same time, Biden could decide to use cyber weapons in an offensive strategy – either in retaliatory counter-attacks or to preempt future attacks. Already, Biden has said he is in favor of cyber weapons under the control of the U.S. military’s Cyber Command, NSA, and the CIA. Ultimately, the United States and Russia will need new ground rules when it comes to cyber warfare, which will eventually require tough negotiations between the two countries and with other major players, such as China. But cyber is not the only bilateral issue with Russia that Biden will need to deal with immediately upon taking office – the New Strategic Arms Reduction Treaty (New START) is set to expire on February 5. Biden is likely to extend this agreement, which is the last remaining nuclear arms control treaty between the United States and Russia, but it will be left with no time to negotiate anything other than the extension. Biden’s Russia policy has yet to take shape, but it is clear that Russian aggression will continue to be a threat to U.S. national security, democracy, and global stability in 2021 and into the foreseeable future.

Wishing you all a healthy and happy New Year! Hope to see you in 2021!