September 29, 2021
The inaugural Trade and Technology Council Meeting — groundhog day or great leap forward?
Hopes were high at the start of 2021 that a new administration in Washington, paired with high vaccination rates in advanced economies, would improve transatlantic relations. Policymakers on both sides of the Atlantic were always going to have difficulty meeting that expectation. This week’s inaugural meeting of the transatlantic Trade and Technology Council (TTC) proves that point.
An ambition to capitalize on the political moment that inspired transatlantic leaders earlier this year led to the creation of no less than ten TTC working groups. These working groups were established to address thorny technical issues facing the transatlantic community in trade and technology. Some clear transatlantic convergences are surfacing around familiar issues — biotech cooperation, a focus on Big Tech regulation, and supply chain/semiconductors. However, agreement on other familiar issues — common regulatory standards, data privacy/data localization, and how to craft a joint approach to the China challenge — remains elusive.
Ultimately, policymakers’ approach to four key issues will illuminate transatlantic leaders’ priorities as they pivot towards a post-pandemic trade policy, balancing economic priorities with values-based priorities: semiconductors and supply chain disruptions, big tech regulation, climate, and China.
Four Key Issues to Watch
- Semiconductors and Supply Chain Disruptions: Semiconductors, the tiny technology that powers the digital economy, are distributed through a global supply chain whose nodes are concentrated in countries experiencing pandemic-related labor force disruptions. Some of those countries (notably, China) are also increasingly under fire for violations of human rights and environmental policies. Labor shortages at ports and along the logistics value chain add to the disruptions of semiconductor supply chains.
Transatlantic leaders can do little to address the labor shortages and pandemic-related health issues outside their own borders. Even vaccine donations outside of the transatlantic community will take time to distribute and take effect. The most transatlantic leaders can offer at this stage is cross-border cooperation, information sharing, and the possible exploration of joint research and development opportunities aimed at generating long-term supply self-sufficiency rather than reliance on global supply chains. The question remaining is whether transatlantic leaders frame the issue in terms of human rights and non-economic values, trade policy, national security policy, or industrial policy.
Production and transportation supply chain issues cannot be resolved immediately. Nor can they be resolved solely by a cabinet-level transatlantic meeting. Therefore, the TTC’s best hope is to generate momentum for initiatives that will have a medium-term impact. The persistent weakness of the multilateral trade framework hampers efforts to address more structural problems in the semiconductor and supply chain contexts related to industrial subsidies.
- Big Tech Regulation: From competition, to content moderation, to data localization, European policymakers seek transatlantic adoption of regulatory standards recently enshrined in the EU’s Digital Markets Act. This is unrealistic. The more likely outcome is a commitment to promote non-discriminatory regulatory standards and, possibly, cooperation concerning competition investigations paired with a promise to explore future joint work on the remaining issues.
Progress regarding cross-border data flows and data privacy is especially unlikely. American and European policies remain starkly at odds regarding whether or not data localization is appropriate. Repeated attempts to safeguard U.S. national security access to personal data continue to be invalidated by European courts. In fact, the Pittsburgh TTC agenda does not even include data privacy issues.
The newly appointed Biden administration team faces serious domestic hurdles here. The U.S. federal legislative framework does not currently provide the Executive Branch with sufficient authority to implement policies consistent with European preferences. Congressional action will be needed
- Climate: Positive, but vague, statements can be expected supporting new technologies to address climate change policy priorities. It is far from clear that the TTC has the authority or the remit to articulate concrete policy commitments regarding sustainable technology. Some would like to see transatlantic agreement on sustainability disclosures, but since this issue transcends the technology sector it is unlikely to receive specific attention from the TTC.
- China: Normally, China is the elephant in the room when transatlantic leaders meet. Not this year. Policymakers increasingly must confront the challenge that non-market economy policies pose to the Western economic model enshrined in post-war multilateral and domestic policy frameworks.
Throughout the 21st century, the pendulum has oscillated between capitals on the appropriate transatlantic stance. During the Bush administration, policymakers in Brussels sought to enlist the United States in efforts to counter Chinese economic policies. By the time the Obama and then the Trump administrations began challenging China more directly, priorities in Brussels shifted to pursue strategic engagement with China.
The landscape is shifting once again. European Commission Vice President Dombrovskis’ speech on September 23 highlights a strategic agenda that would involve joint cooperation in a shadow-boxing initiative across a range of multilateral organizations. However, this strategy would require nations to agree to a dramatic expansion of the remit of the World Trade Organization and the Organization for Economic Co-operation and Development OECD to address forced transfer of technology and industrial subsidies.
Transatlantic leaders’ approach to these four issues will help define the future of U.S.-EU trade and technology negotiations. However, those hoping for a “great leap forward” regarding joint initiatives misconstrue the nature of the U.S.-EU relationship. Transatlantic leaders walk a narrow line while seeking alignment and skirting disagreements. Incremental progress requires constant, structured dialogue. The TTC provides a new framework for finding alignment amid a technological transformation accelerated by the pandemic. How policymakers address the four issues above will tell us whether or not the TTC has a chance of lasting longer than its predecessors (the Transatlantic Economic Council and the Transatlantic Trade and Investment Partnership).
Barbara C. Matthews is non-resident senior fellow at the Atlantic Council. While in government, she served as the first US Treasury Attache to the EU with the Senate-confirmed diplomatic rank of minister counsel. She has also served as senior counsel to the House Financial Services Committee. She is currently Founder and CEO of BCMstrategy, Inc., a technology company using patented processes to quantify public policy risks.
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