SUMMARY ECONOMICS AND SECURITY COMMITTEE - OF THE MEETING OF THE - NATO Parliamentary Assembly
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SUMMARY OF THE MEETING OF THE ECONOMICS AND SECURITY COMMITTEE Saturday 15 May 2021 Videoconference 103 ESC 21 E | Original: English | 27 May 2021
103 ESC 21 E
ATTENDANCE LIST
Chairperson Philippe FOLLIOT (France)
General Rapporteur Christian TYBRING-GJEDDE (Norway)
Rapporteur, Sub-Committee on
Transition and Development Michal SZCZERBA (Poland)
Rapporteur, Sub-Committee on
Transatlantic Economic Relations Faik OZTRAK (Turkey)
President of the NATO PA Gerald E. CONNOLLY (United States)
Secretary General of the NATO PA Ruxandra POPA
Member Delegations
Albania Myslim MURRIZI
Belgium Annick PONTHIER
Bulgaria Hristo Georgiev GADZHEV
Canada Ziad ABOULTAIF
Leona ALLESLEV
Cheryl GALLANT
Croatia Ante BACIC
Dario HREBAK
Czech Republic Robert KRALICEK
Denmark Mads FUGLEDE
Estonia Kerstin-Oudekki LOONE
France Nicole Monique DURANTON
Patricia MIRALLÈS
Laurence TRASTOUR-ISNART
Germany Dagmar FREITAG
Jürgen HARDT
Karl A. LAMERS
Jürgen TRITTIN
Greece Marios SALMAS
Hungary Laszlo György LUKACS
Iceland Willum Thor THORSSON
Jon Steindor VALDIMARSSON
Italy Adriano PAROLI
Guglielmo PICCHI
Latvia Ojars Eriks KALNINS
Ivans KLEMENTJEVS
Lithuania Remigijus ZEMAITAITIS
Luxembourg Semiray AHMEDOVA
Nancy ARENDT KEMP
Lydia MUTSCH
Montenegro Danilo SARANOVIC
Netherlands Alfred ARBOUW
Ruben BREKELMANS
North Macedonia Antonijo MILOSHOSKI
Ilija NIKOLOVSKI103 ESC 21 E
Norway Christian TYBRING-GJEDDE
Poland Michal Roch SZCZERBA
Wojciech ZUBOWSKI
Portugal Maria Da Luz ROSINHA
Romania Victor ILIE
Attila LASZLO
Gheorghita MINDRUTA
Slovakia Juraj KRUPA
Slovenia Monika GREGORCIC
Spain Maria Jesús CASTRO
Victor RUIZ
Turkey Nurettin CANIKLI
Mevlut KARAKAYA
Faik OZTRAK
Zehra TASKESENLIOGLU
United Kingdom Harriett BALDWIN
Angela CRAWLEY
Lord HAMILTON OF EPSOM
John SPELLAR
Bob STEWART
United States Neal Patrick DUNN
Gregory Weldon MEEKS
Linda SANCHEZ
Associate Delegations
Azerbaijan Malahat IBRAHIMGIZI
Serbia Andrijana AVRAMOV
Sweden Annicka ENGBLOM
Karin ENSTRÖM
Switzerland Pierre-Alain Roger FRIDEZ
Werner SALZMANN
Mauro TUENA
Ukraine Yehor CHERNIEV
Parliamentary Observers
Assembly of Kosovo Driton HYSENI
Kazakhstan Erlik TAIZHANOV
Speaker John HASSLER
Professor and Deputy Director at the Institute
for International Economic Studies at
Stockholm University
International Secretariat Paul COOK, Director
Anne-Laure BLEUSE, Coordinator
Michael BELAFI, Research Assistant
Pierre DE DREUZY, Research Assistant103 ESC 21 E
I. Opening remarks by Philippe FOLLIOT (France), Chairperson of the Economics
and Security Committee
1. The Chair, Philippe Folliot (France) welcomed members to the online Spring session
of the Economics and Security Committee and lamented that participants were not able to
meet in Stockholm in person due to the COVID-19 pandemic. He then declared the meeting
open and discussed the schedule for the day’s meeting.
II. Adoption of the draft Agenda [074 ESC 21 E]
2. The Chair asked members to adopt the meeting Agenda. The draft Agenda [074 ESC
21 E] was adopted.
III. Adoption of the summary of the meeting of the Economics and Security
Committee on 20 and 21 November 2020 [205 ESC 20 E]
3. The Chair asked members to adopt the Summary of the meeting of the Economics and
Security Committee meeting held on 20-21 November 2020. The Summary [205 ESC 20 E]
was adopted.
4. The Chair gave the floor to NATO PA President Gerald E. Connolly who thanked him
for his work. The President stated that economics has vital security dimensions and these
linkages have grown more apparent in the midst of the pandemic. He noted as well that
Europe and the US have engaged in massive stimulus spending but will be challenged to
sustain growth over the coming months.
5. The Chair thanked President Connolly for his support of the Committee’s work.
IV. Presentation by John HASSLER, Professor and Deputy Director at the Institute for
International Economic Studies at Stockholm University, on A Swedish
Perspective on the Global Economic Outlook
6. The Chair introduced Karin Enström, member of the Swedish Parliament and former
Defence Minister who introduced the first speaker, John Hassler.
7. Dr Hassler explained that the current economic turbulence is the product of the largest
synchronised fall in GDP in the history of national accounting. The speaker noted that because
GDP is largely driven by demand, and as demand had fallen sharply as a result of measures
to fight the pandemic, a quick recovery in demand would likely trigger a rapid return to growth
once public health conditions improved.
8. He noted that government stimulus aimed at raising demand normally helps maintain
growth in the midst of a downturn, but because this crisis has been a product of unnatural
demand suppression like social distancing requirements, that demand stimulus is not
necessarily the appropriate core public policy response. The speaker said that an appropriate
economic policy in the current circumstances would be to short circuit feedback mechanisms
which amplify the fall in production and income. A key tool for this would be non-standard
central bank interventions and measures like subsidies to affected firms and individuals
bearing the brunt of economic lockdowns.
1103 ESC 21 E
9. Initially, the massive and immediate asset purchases from central banks helped keep
national economies afloat. In Europe, the number of worked hours went down at the same
rate that GDP did, but the reduction in employment and increase in unemployment was much
smaller than in the United States. Europe has not experienced a flood of bankruptcies, and as
unemployment begins to rise, the GDP per capita of advanced economies will increase at only
a slightly reduced rate compared to the 7-year pre-crisis trend. This is a substantial
improvement over what transpired in the 2008 crisis when the damage inflicted was deeper
and probably more long lasting.
10. Indeed, one lesson this crisis has imparted is that the global economy is significantly
more resilient than it is frequently argued. This is why a massive stimulus to sustain economic
growth would be ill advised the speaker suggested. There is already significant pent-up
demand, and it will be unleashed as national economies begin to open up.
11. The real key to sustained recovery, the speaker said, is mass vaccination, and here it is
evident that the private sector has performed admirably in producing effective vaccines so
quickly. Intellectual property protection is central to this dynamic and should not be tampered
with. He noted that vaccinations will be critical for the global economy and that the economic
benefits of vaccines are generalised. Thus, support for vaccines in developing countries is
also in the interest of the most developed countries. The COVAX fund, which helps developing
countries purchase COVID vaccines, he argued, should be fully funded.
12. Once the recovery is consolidated, ‘bridging policies’ that were designed to sustain
demand in the midst of the crisis should be phased out. Investments in infrastructure are
important but should not be carried out for the purpose of bolstering demand but rather should
be seen and managed as long-term investments that will bolster productivity. The speaker
added that a number of governments could confront debt problems due to significant budget
deficits.
13. Ivans Klementjevs (LV) asked about the European Central Bank’s approach to stimulus
policies which seemed to contradict the speaker’s recommendations. The speaker recognised
that the ECB’s response was appropriate, but he suggested that further stimulus should not
be needed.
14. Faik Oztrak (TR) asked about rising private debt, bank regulations and the kind of
measures needed to sustain a healthy banking system. The speaker noted that the balance
sheets of companies have worsened particularly in the most adversely impacted sectors like
tourism, and here the governments might need to provide a degree of support. The Banking
sector seems relatively strong and central banks are in a good position to mitigate the impact
of any downturns.
15. Ziad Aboultaif (CA) asked if central bank money printing might trigger inflation.
The speaker replied that he is not particularly worried about inflation in the short run because
central banks printed money to buy risky assets and not to underwrite sustained deficits. Once
central banks sell off some of the more at risk assets in their portfolio, there should not be an
increase in inflation. That said, once demand returns an uptick in inflation is likely.
16. Christian Tybring-Gjedde (NO) noted that the pandemic is not yet over and asked how
long stimulus packages can be sustained, particularly if the pandemic were to induce another
downturn. The speaker responded saying it has been relatively easy for developed countries
to borrow money and this can easily continue in the short-term with no major impact. He added
that it is vital to get the vaccine to developing countries which will both help these countries
cope with the disease and revitalise their national economies.
2103 ESC 21 E
17. The Chair asked if public sector/infrastructure investments should be focused on the
green transition. The speaker suggested that his view on the matter is somewhat contrarian,
and that the crisis might not be the best moment to launch spending projects aiming to enact
fundamental structural change.
18. The Chair thanked the speaker for his excellent presentation.
V. Consideration of the preliminary draft Report of the Sub-Committee on
Transatlantic Economic Relations on The Global Economic Crisis: Implications
and Prospects [018 ESCTER 21 E] presented by Faik OZTRAK (Turkey),
Rapporteur
19. The Chair gave the floor to Faik Oztrak to present his preliminary draft report on the
implications and perspectives of the global economic crisis. The Rapporteur opened his
remarks by noting that after contracting 3.3 % in 2020, the global economy is projected to
grow 6% in 2021 and 4.4% in 2022. The acceleration of vaccination campaigns could soon
achieve rising degrees of herd immunity in developed countries, and this will facilitate a return
to normal economic activity even in vulnerable sectors like tourism. This should, in turn, help
restore investor and consumer confidence and act as a catalyst for a demand-led recovery.
20. There are potential problems, however. New and possibly “vaccine resistant” variants of
COVID are emerging in countries where vaccines are not widely available. This could put at
risk the progress the world has made in recent months. This only reinforces the need to
conduct sustained and comprehensive vaccine campaigns. The Rapporteur also noted that if
the debt issue is not handled well, it could generate new financial pressures given the huge
debts that governments have accrued over the past year. Along these lines, the European
Commission will implement host of new levies in member states to repay loans worth hundreds
of billions of Euros.
21. The Rapporteur noted that Western countries have struggled to control the pandemic.
In contrast, for East Asian countries, COVID-19 is the third major epidemic which they have
dealt in the 21st century. The experience they gained throughout the 2003 SARS and
2014-2015 MERS pandemics might explain why Asian countries initially managed the
pandemic more successfully than their Western counterparts.
22. The preliminary draft report indicates that several authoritarian actors have already
instrumentalised the pandemic to discredit democratic governance. China, for instance, has
incorporated its successful fight against COVID-19 into a broader narrative of a “peaceful rise”,
the weakness of democratic states, and the superiority of its own authoritarian model.
23. The economic crisis arising out of the pandemic is particularly acute in the developing
world. Many of these countries lack the financial depth to counteract the economic impact of
the pandemic. Global solidarity is needed as is a far more focused effort to get vaccines to
vulnerable countries. The COVAX initiative provides a coherent vehicle for extending this
support. The report also notes that the Biden Administration has brought the United States
back into the World Health organization.
24. The Rapporteur concluded by noting that the global economy confronts a range of
longer-term challenges including global poverty, growing inequality, mounting debt levels,
ageing infrastructure, insufficient digitalisation, and underinvestment in climate-related
projects. Sustained global recovery will not be possible unless less developed countries find
a pathway to growth. Wealthier countries should support global vaccination campaigns, while
embarking upon debt relief, smarter and more targeted aid policies, and more open trading
relations.
3103 ESC 21 E
25. Nicole Duranton (FR) expressed her hope that the report will take into consideration
the strategy that France has used in order to help the most effected sectors. She provided an
overview of several measures the French government has undertaken took during the
pandemic. The Rapporteur replied that in the final version of the report he would try to account
for some of the best practices national governments have adopted.
26. Ivans Klementjevs pointed out that countries undertook different approaches to the
pandemic. He also noted how quickly researchers moved to create new vaccines and noted
that it makes sense to begin preparing for the next pandemic now.
27. John Spellar (UK) raised three factors that could make the economic future uncertain:
1) Chinese mercantilism, 2) the rapid growth of financial speculation and fringe banking, and
3) the limits of international last minute supply chain management where minor interruptions
can have a major impact on the world economy. He added that COVID could reoccur annually
and that innovative ways to cope with this that do not result in economic lock down will be
essential.
28. Neal Dunn (US) mentioned the very high returns to investment in the vaccine related
research. He suggested that the market had served the international community well and
called for continued efforts to lower trade and other commercial and investment barriers to
ensure the diffusion of this essential medical technology and continued prosperity.
29. The Rapporteur thanked members for their contributions and suggestions for the draft
report.
VI. Consideration of the preliminary draft General Report on Allied Defence
Spending: Enduring Threats and New Constraints [017 ESC 21 E] presented by
Christian TYBRING-GJEDDE (Norway), General Rapporteur
30. The Chair asked Christian Tybring-Gjedde, the General Rapporteur to present his
preliminary draft report on Allied Defence Spending: Enduring Threats and New Constraints.
31. The Rapporteur highlighted critical threats to the Alliance that justify increased defence
spending. He noted, for example, Russia’s recent military build-up on the border with Ukraine,
its increasingly aggressive military posture, and its use of information war tactics. At the same
time, China has sought to take advantage of the chaos wrought by the pandemic to pursue
aggressive foreign and economic policies that threaten NATO Partners in Asia and weaken
the rules-based international order.
32. Even before Russia illegally annexed Crimea and launched military actions in Eastern
Ukraine, there had been a clear need for higher defence spending. Yet, until that time, Allied
defence spending had continued to fall even as the threat environment worsened. At the 2014
Wales Summit, NATO members pledged to reverse spending trends and revamp Alliance
military capabilities. Two metrics were adopted: governments committed to spend 2% of GDP
on defence while 20% of total defence spending would focus on the development and
acquisition of new equipment by 2024.
33. Before the pandemic struck, several NATO members were on their way to meeting their
2 and 20 % commitments for the first time since the Wales Summit. However, many Allies
were not on track to do so on time. And while more NATO Allies met these spending
commitments this past year than many experts had previously predicted, this achievement is
partly because of falling GDPs and relatively static defence budgets.
4103 ESC 21 E
34. The Rapporteur indicated that the 2 and 20 percent goals are not perfect, and that other
supplementary metrics should be considered to add nuance to defence spending debates.
In fact, actual capabilities and mission contributions are not part of this equation, although
these are very important considerations in the overall burden sharing framework.
The Rapporteur added that successful defence and deterrence is based not just on how much
money is spent, but also on how and where resources are disbursed.
35. The Rapporteur stated that the economic difficulties triggered by the pandemic demand
that NATO members collectively spend their scarce economic resources more efficiently.
He suggested that Allies should look to expand interoperability initiatives, establish more
collaborative projects among militaries, and strive for greater consolidation and integration of
national defence industrial bases. The report includes a long list of projects that both NATO
and the EU are supporting to encourage this kind of cooperation.
36. The Rapporteur concluded by suggesting that Allies should remain open to innovative
approaches to resolving the burden sharing dilemma. He said that the Wales pledge (including
the 2% and 20% metrics) remains a key tool to focus government and public thinking on the
need to increase the commitment of Allied countries to national and collective defence and
stated that while the economic challenges of the pandemic cannot be understated, NATO
member states still possess the economic and financial wherewithal to meet essential defence
spending obligations.
37. Nicole Duranton raised several concerns regarding the idea of a NATO Bank and asked
what sort of common criteria would be imposed regarding how such defence loans would be
financed and distributed and whether it would underwrite dual-use infrastructure.
Mr Tybring-Gjedde responded that he shared her hesitations on the matter.
38. Ivans Klementjevs pointed to paragraph 68, which describes NATO’s common funding
initiative and suggested that paragraph be slightly altered if the Rapporteur would agree.
The Rapporteur agreed that paragraph 68 could be altered.
VII. Consideration of the preliminary draft Report of the Sub-Committee on Transition
and Development on Belarus: Political, Economic and Diplomatic Challenges
[019 ESCTD 21 E] presented by Michal SZCZERBA (Poland), Rapporteur
39. Michal Szczerba (PL) opened his remarks by thanking members for participating in the
Sub-Committee’s online visit to Poland. He mentioned that he was present in Belarus to
observe the August 2020 elections and had witnessed the horrific crackdown on peaceful
protestors which followed. He suggested that President Lukashenko’s regime had essentially
stolen those elections.
40. The Rapporteur highlighted how Poland had called for an extraordinary meeting of the
EU Council to discuss the situation in Belarus but that the EU’s response was tepid.
The Rapporteur described how Lukashenko had long sought to preserve working relations
with the West and with Russia. This has become nearly impossible, however, as a result of
the ongoing crackdown. The Rapporteur stressed that Lukashenko earns Russian support by
deepening military cooperation with Russia, engaging in economic and political integration
with it, and agreeing to sell valuable state assets, especially in the energy industry to Russian
interests. He noted that even if the Union State is not implemented, there are serious concerns
both in Belarus and beyond that the country is rapidly becoming a puppet state under Kremlin
control. The Rapporteur added that the Kremlin will eventually look for a suitable replacement
for Lukashenko.
5103 ESC 21 E
41. The Rapporteur concluded with several recommendations. The international community
should continue to press the Belarusian regime to uphold human rights. Russia should also
understand the cost of pursuing a policy of annexation. Alliance members should be prepared
to apply stronger sanctions to those directly engaged in the oppression of the Belarusian
democracy movement. NATO Allies may need to take swift measures to shore up deterrence
in the region and provide critically needed reassurance to Allies on the eastern flank.
The government of Belarus must be made aware that the international community is
monitoring this situation very closely and that the West must be ready to act; and finally, that
Belarus must be kept high on the international agenda.
42. Ivans Klementjevs said that language from NATO might be added to the preliminary
draft report. “NATO Allies have been closely watching the developments unfolding in Belarus
since August 2020. The Secretary General has called on the Belarusian authorities to
demonstrate full respect for human rights, including freedom of speech and the right to
peaceful protest. He has underlined that it is for the people of Belarus to determine their future.
All Allies support a sovereign and independent Belarus”.
VIII. Future activities of the Sub-Committee on Transition and Development, and the
Sub-Committee on Transatlantic Economic Relations
43. John Spellar briefly outlined the activities of the Sub-Committee on Transition and
Development and thanked Michal Szczerba for his excellent Sub-Committee report on the
security, diplomatic and economic challenges arising out of the situation in Belarus. Mr Spellar
highlighted the upcoming visit to Lithuania which could either be online or in person depending
on the public health situation. He thanked the head of the Polish delegation,
Przemyslaw Czarnecki, and members and staff of the Assembly for their work.
44. Ivans Klementjevs next outlined the activities of the Sub-Committee on Transatlantic
Economic Relations. He noted that members of the Sub-Committee had participated in the
annual visit to the OECD in Paris (online) which focused on key themes addressed in the
preliminary draft report by Faik Oztrak. He mentioned as well that members are looking to
organise a visit to the Netherlands together with the Political Committee’s Sub-Committee on
transatlantic relations this fall as well as to hold meetings in Washington and New York with
the CDSDG if it was possible considering the pandemic.
IX. Other Business
45. Zehra Taskesenlioglu (TR) raised the matter of the Israel-Palestine crisis which, she
noted, had started during the holy month of Ramadan. She suggested that both NATO and
the NATO PA should monitor the situation there.
46. The Chair then noted that the next meeting of the Committee will take place in Lisbon in
October. He thanked the Swedish delegation for hosting the Session, the members of the
Committee, the speakers, Rapporteurs, interpreters, and the members of NATO PA
Secretariat. He then closed the meeting.
_______________________
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