The United States and Europe are currently in political limbo. On one side of the Atlantic, the outcome of the US presidential election in November could go either way. On the other side, the makeup of the new European Commission is yet unclear. But what is certain is that the United States and the European Union (EU) face a range of shared challenges ahead no matter who is at the helm. These challenges include predatory nonmarket economic practices, deindustrialization, supply chain vulnerabilities, the transition to a digital economy, and climate change. Successfully dealing with these issues will require unprecedented transatlantic coordination both to leverage joint power and to avoid causing collateral damage to each other. To that end, policymakers in Washington and in Brussels should begin discussions on the contours of a comprehensive, three-pillar US-EU economic agreement now, so that both sides can hit the ground running in early 2025.
It won’t be easy. Ambitions to broaden and deepen the transatlantic marketplace suffer from past disappointments. The Transatlantic Trade and Investment Partnership foundered in disputes over hormone-treated beef and investor-state dispute settlement. The current EU-US Trade and Technology Council has produced only narrow benefits. In the absence of coordination, both Washington and Brussels have resorted to unilateral measures, such as the US Inflation Reduction Act, national security-related tariffs on steel and aluminum, and the EU’s doubling down on its long-proposed carbon border adjustment mechanism. In the future, the need to take urgent unilateral measures will only increase as the dire consequences of failing to act become clear.
A comprehensive transatlantic economic agreement—not a traditional trade agreement—could avoid relitigating the issues that have sunk past US-EU trade and investment initiatives. Rather, learning from the lessons of past efforts, Washington and Brussels must accept that, despite their shared interests, Europe and the United States have decidedly different economic cultures and polities. And any new comprehensive agreement should accommodate these differences while coordinating parallel approaches to the rapidly evolving global economy.
One pillar of such an agreement should be addressing third-country practices. Both the EU and the United States are currently implementing a lengthening list of defensive trade measures—tariffs on electric vehicles and solar panels and investment screening—to protect their domestic industries and workers from subsidized Chinese competition. Unless Washington and Brussels can agree on mutually reinforcing defensive measures, Beijing will simply exploit differences in future US and European market openness. Recent experience with US duties on Chinese subsidized steel and aluminum production painfully demonstrates that unilateral defensive trade measures can adversely impact European producers. Washington and Brussels have spent more time and effort fighting each other than jointly confronting China’s nonmarket practices.
A bilateral comprehensive agreement could identify a set of policies—the types and levels of state subsidies, the use of stolen intellectual property, state regulatory and other protectionist measures—that Washington and Brussels agree lead to “unfair” competition and thus merit parallel defensive measures that do not distort transatlantic commerce.
The second pillar of a comprehensive agreement should be improved regulatory cooperation. Regulations often seem esoteric, but they set the rules of business behavior. In a world in which market-based economies are in competition with state-driven economies, the United States and the EU need regulations that reinforce each other, do not conflict, and do not inflict unnecessary collateral damage.
Regulatory cooperation is not about adopting identical rules (the United States and the EU have tried and failed before). Nor is it about forcing US and European regulators to sit down and talk with each other (which has produced little in the way of results). Rather, Washington and Brussels need to first agree that in a deeply integrated transatlantic economy, regulations should achieve their objectives without unnecessarily undermining bilateral trade. Second, they need to agree on joint pre-regulation research and information-gathering so that regulators are each working with a common set of facts. And the US and EU regulators need to offer each other’s stakeholders a meaningful opportunity to provide pre-standard-setting and pre-regulation input to minimize business friction.
Finally, successful coordination of external measures and future regulation will not be possible without a third pillar—greater ongoing input from the business, labor, consumer, environmental, and political communities. It is a fundamental principle of democracy that those affected by governmental actions have a right to participate in such decision making. But it is also practical. As the ones directly affected, these stakeholders can ensure that the issues addressed are of practical significance. In this regard, it is particularly important that the US Congress and European Parliament are fully involved as negotiations proceed, to ensure that whatever is agreed upon has a chance of entering into force.
As both Brussels and Washington face an uncertain and challenging 2025 and beyond, they cannot afford to allow past failures to constrain future ambitions. They face too many shared challenges. Going forward, the EU and the United States can either row together in increasingly turbulent waters, or they will most assuredly sink separately.
L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center. He served as assistant US trade representative for Europe and the Middle East in the Office of the United States Trade Representative from 2010 to 2023. He was chief negotiator for comprehensive trade agreements with the EU and the United Kingdom, as well as trade lead for the US-EU Trade and Technology Council.
Bruce Stokes is a visiting senior fellow at the German Marshall Fund, a former senior fellow at the Council on Foreign Relations and the former international economics correspondent for the National Journal.
Further reading
Tue, Jun 4, 2024
Katherine Tai on how US and EU trade approaches must ‘evolve’ to deal with China and other global challenges
New Atlanticist By Katherine Walla
The US trade representative said that the United States and EU should establish a community of democracies to adapt their trade approaches to a changed world.
Tue, Mar 26, 2024
In this year of elections, the US-EU Trade and Technology Council should get strategic
New Atlanticist By Frances Burwell
On April 4-5, US and EU officials will meet in Leuven, Belgium, where they will need to chart a bolder way forward for the US-EU Trade and Technology Council.
Tue, Sep 10, 2024
Five questions (and expert answers) about Draghi’s new report on European competitiveness
New Atlanticist By
On Monday, Mario Draghi issued a clarion call about the dangers of lagging growth and productivity in the European Union. Atlantic Council experts dig into the four-hundred-page report.
Image: Container ship Container ship One leaves the port of Hamburg, Germany