Search for a report, a publication, an expert...
Institut Montaigne features a platform of Expressions dedicated to debate and current affairs. The platform provides a space for decryption and dialogue to encourage discussion and the emergence of new voices.

Deciphering the EU-US Trade & Technology Council

Deciphering the EU-US Trade & Technology Council
 François Godement
Special Advisor and Resident Senior Fellow - U.S. and Asia

At a well-known transatlantic gathering of China policy experts and officials - the GMF's Stockholm China Forum - participants asked questions about the EU-US Trade and Technology Council (TTC), holding its 4th ministerial meeting at the same time, also in Sweden. What were the friction points among Americans and Europeans in this broad process where officials are meant to find transatlantic solutions for trade, technology and now security? Those questions received no answer in the otherwise stellar Stockholm gathering. And for good reason: second-track experts are usually unfamiliar with the inner workings of the TTC, and those officials who are in the loop mostly won’t tell. The best sources were a Politico account based on leaked sources of pre-meeting draft documents, and of course, the joint EU-US statement issued at the end. The Politico source focused on points of friction around China, the Inflation Reduction Act, and internal European disagreements on economic security. The last seemed to undercut European Commission President von der Leyen’s push for a transatlantic compact with strong defensive measures regarding China, even if the country is left unnamed. The joint statement, of course, underscored instead deliverables. Yet all of these were starting, ongoing or expanding processes rather than final or binding agreements. 

Some deliverables could prove consequential or have genuine technical relevance. First, there is the shared ambition of moving forward on AI management, and establishing a "catalogue" on AI research as it relates to extreme weather and climate forecasting, emergency response management, health and medicine improvements, energy grid optimization, and agriculture optimization. Both parties then applauded efforts towards compatibility of physical connectors (plugs) and a common vehicle-to-grid communication interface for all power levels. The United States and the European Union also agreed on a mechanism to avoid subsidy races in semiconductor factories including potential "claw-back of excessive profits" from companies. They discussed the importance of post-quantum cryptography. On Mutual Recognition Agreements the US and the EU expanded earlier initiatives on pharma and maritime equipment. They also concurred on a green transition work plan that includes joint measurement of embedded emissions and supply chain transparency. There was also a shared commitment from both sides to "consult in advance of the introduction of export controls on sensitive items" and "align approaches where feasible" on future outbound investment control. On connectivity and digital infrastructure, both sides agreed to seek a vision of 6G developments and to accelerate cooperation in a number of third countries, as well as selecting "trusted subsea cable providers". Finally, there was a statement on transparency and accountable online principles to protect children on digital platforms and to "structure exchanges on foreign information manipulation and interference". 

Despite this extensive list, one cannot fail to note that almost all of these initiatives are work in progress, or at best, guidance. The chief reason for this is the asymmetry between the two sides. The US federal government works in many areas with rules rather than laws that must be passed by Congress. On issues where a law is needed, the Biden administration is treading carefully. For instance, while it would likely endorse, along with congressional support, a digital privacy act in the manner of the EU’s GDPR, it knows that the only clear consensus within Congress at this point is on the protection of children. But on the EU side, the European Commission’s limitations are greater. For binding agreements and rules, it needs not only the EU Parliament’s approval but also unanimous approval by the 27 Member States. To this, one can add the possible censorship at some later date by the European Court of Justice (ECJ). This was the case with the ECJ knocking down two successive cross-border data transfer agreements with the United States. It could well happen a third time, what’s more after a protracted interval. One fails to see how the EU and US will be able to jointly adopt compatible oversight on AI-related issues (however justified this may be) if an agreement on data transfer has not been able to pass legal requirements. At best, we will be in the domain of voluntary action such as a code of conduct, with limited enforcement means.

The strategic issue of cross-border data flows is an emblematic example of limitations in the transatlantic dialogue. Third countries, where commercial or governance concerns often have priority over strict personal data protection, may be in sync sooner than Europeans with Americans. Even China, with its intrusive look-through digital policies, is trying to get on board less demanding data transfer agreements.

Much of the fight in today’s world is no longer about implementing a universal, multilateral, and rules-based approach, but instead about setting up the largest possible group of countries, citizens and consumers who share a like-minded set of rules (for democracies) or non-rules (for authoritarian regimes). The European Union has been trying since 2015 - and so far failed - to create an Investment Court System to rescue the Transatlantic Trade and Investment Partnership (TTIP) from the investor-state dispute settlement (ISDS) controversy. In the same manner, the Biden administration has come up with what could be termed a stand-alone administrative court system, the Data Protection Review Court, in order to satisfy EU requirements for data transfer - and the EU Commission. Opponents - and possibly the ECJ - might still bring it down, in what would be the loss of a major transatlantic asset for the digital world.

The EU obstacle course to sign formal and binding agreements is detrimental to Europe itself, since it also makes it more difficult to move the American partner beyond stated intentions. A lack of formal agreement could also be detrimental to the Biden administration, which has staked its international working approach on resolving disputes and seeking consensus with allies. Even within the administration, there are those who would rather resort to unilateral action and arm-twisting of foreign states and companies for the sake of efficiency. And this is nothing, if we consider populists, neo-isolationists and MAGA exponents in US politics.

Negotiations seldom take place in public. When they leak, a specific outcome can suddenly become a target of public opposition: this is how the TTIP was derailed in 2016 by the ISDS issue, not to mention chlorinated chicken (which, for unfamiliar readers, was also partly responsible for killing the planned EU-US trade agreement). The TTC’s strong point is flexibility, behind-the-scene discussion of issues that can be split among working groups, and reaching a potential consensus without the inherent tension that accompanies outright negotiations. It is a method to resolve past, present, and future transatlantic frictions, without being an "all-or-nothing" process. The TTC was initiated by Europeans, and indeed it is closer to the European Union’s tradition of step-by-step moves and soft resolution rather than to the broad, executive-based initiatives practiced in the United States.

But this also requires good faith and compromises on both sides. In some cases, the United States will not deliver. And in others, the European Union cannot. For the first instance, consider the ongoing disputes surrounding steel and aluminum duties that persist since the Trump administration. Tensions also exist in the area of high technologies such as AI or quantum. The United States is - perhaps rightly - adamant that it will not sacrifice staying at the leading edge of technology for the sake of rules. 

We should also consider the second instance - where the EU itself is the problem. On subsidies and avoiding overproduction and duplication (in semiconductors or batteries), European Member States also compete with one another, which makes it difficult for the European Commission to negotiate on their behalf. In fact, the limited membership of TTC talks (led under the Commission) may be used by some of these Member States to watch from a distance and later block any intended agreement that they do not like. This type of ex-post bargaining may in time undermine the basis of the Trade and Technology Council. It is important for the European Union to move beyond these obstacles. Providing pre-meeting mandates from Member States would help to empower the Commission within the TTC. Opening up some of the working parties would also be useful. 

As for the United States, it is important for it to be patient and stick to the overarching goal, which is unity of purpose and strategy. The war in Ukraine has brought much of this. Extending the consensus, compromising on divergences of interests, and moving together towards third parties are the means to resist the forces of global fragmentation, by building a nearly multilateral world at a time when full multilateralism seems out of reach. 



Copyright image: Jonas EKSTROMER / TT News Agency / AFP

Receive Institut Montaigne’s monthly newsletter in English