Assessing Progress within the TTC
May 18, 2022
On May 15 and 16, U.S. and EU leaders convened a second meeting of the Trade and Technology Council (TTC), a diplomatic initiative consisting of 10 working groups intended to enhance transatlantic cooperation on specific policy problems. The inaugural TTC meeting was held in Pittsburgh in September 2021, and leaders met this week outside of Paris for the second meeting. On the U.S. side, Secretary of Commerce Gina Raimondo, Secretary of State Anthony Blinken, and U.S. Trade Representative Katherine Tai cochaired the meeting. European Commission executive vice presidents Margrethe Vestager and Valdis Dombrovskis cochaired the EU side. The TTC joint statement offers additional details on the questions discussed below.
From the outset, the purpose of the TTC has been not to address many of the outstanding bilateral trade issues, but rather to discuss new areas where the parties can achieve tangible progress. Other transatlantic dialogues, including the Global Arrangement on Sustainable Steel and Aluminum, as well as Privacy Shield negotiations that have yielded a new transatlantic data-sharing framework, are occurring outside of the TTC framework.
The TTC agenda has been designed to focus on emerging issues, where the dividing lines between the European Union and the United States are not so clearly drawn and where agreement on common approaches might be more easily reached. This includes building standards for critical and emerging technologies, creating guidelines for human-centric artificial intelligence (AI), and reaffirming the transatlantic commitment to combating climate change.
Relatively Easy Cooperation
Not surprisingly, dealing with Russia’s invasion of Ukraine has also become a major focus of TTC activity, particularly cooperation on sanctions and export controls. The West’s response to Russia on sanctions, export controls, and transfer of arms has been remarkable. Continued close coordination on sanctions is expected, but whether that will ultimately translate into the same level of cooperation outside the Ukraine context remains to be seen. It is unclear, for example, whether this degree of cooperation would extend to a scenario in which the United States seeks similar sanctions on China in the event of a Taiwan invasion, or if the United States were to seek tougher export controls on technology transfer to China. Despite current momentum within the transatlantic relationship, the two parties may maintain fundamentally different approaches to strategic adversaries other than Russia.
The joint statement underscores the need to build more geographically and commercially diversified supply chains and directly highlights an overdependence on China for the production and processing of certain inputs and goods. In the supply chain annex, the parties agreed to develop an early warning and monitoring mechanism on semiconductor value chains, monitor and prepare for supply chain disruptions, and enhance transparency and commit to exchange information to avoid a subsidy race. These types of generalized commitments are relatively easy to put forth, but much more difficult to achieve in practice. On semiconductors in particular, the key questions will be how much information the European Union and United States is each prepared (or legally able) to obtain from private companies and how much governments would be willing to share with other countries.
Another question is whether the parties will cooperate on outbound investment reviews. The joint statement conclusions on investment screening note that the parties “have a shared view on the importance of establishing fully-fledged foreign investment screening mechanisms within their territories and beyond.” Similar to the content on supply chains, it is not clear how far the parties would be willing to go in terms of sharing proprietary information in order to make decisions in concert. Furthermore, with outbound investment screening measures under consideration in Congress and in the Biden administration, and with their outcome uncertain, it remains to be seen whether the European Union would ultimately pursue a similar review instrument.
The parties also agreed to enhance cooperation on nonmarket policies and domestic policy responses to economic coercion. According to the joint statement, “When using domestic tools to address non-market, trade-distortive policies and practices, the United States and the European Union will seek to consult or coordinate with each other, with a view to avoiding or mitigating unintended consequences for each other, where possible.” The European Union’s new anti-coercion instrument, which was modeled after U.S. Section 301, affords the European Commission a new level of authority over combating unfair trade practices, which could enable closer transatlantic cooperation on unfair trade practices—if the political will to jointly combat economic adversaries prevails.
The TTC produced surprising progress on digital regulation, despite previous disagreement and lack of coordination. Working Group 1 on technology standards resulted in the establishment of a strategic standardization information (SSI) mechanism to encourage deeper transatlantic cooperation on technology regulation. The joint statement also reaffirmed the parties’ commitment to developing trustworthy, human-centered AI. The parties aim to advance the OECD AI Recommendations and provide information on the implementation of forthcoming EU legislation, such as the EU Artificial Intelligence Act, which represents forward momentum on a historically complex set of policies. Lingering friction over the European Union’s Digital Markets Act was not addressed at the TTC and remains an issue.
More Challenging Areas of Cooperation
Within some policy areas, cooperation is proving more difficult. One is climate policy. Both parties seek sharp emissions reductions, but the political conversation in the United States is much further behind, and legislative packages to combat climate change continue to stall. Underscoring the parties’ differing approaches to the nexus of trade and climate, the European Union initially sought the inclusion of a climate “peace clause” in the joint statement, which would have represented a mutual agreement not to penalize each other for climate-related subsidies. However, the clause was ultimately removed, probably because the United States wanted to reserve the option of objecting to the European Union’s carbon border adjustment measure (CBAM) proposal, and because agreeing to refrain from taking action pursuant to U.S. anti-subsidy laws would require an act of Congress.
It is not unusual to include and then remove language from agreement texts, which are sometimes in the process of being finalized until just before their release. It can also be an effective strategy to elevate a discussion—in this case on the merits and feasibility of a peace clause—in a broader context, and potentially encourage momentum on the topic outside of the TTC. For now, however, Brussels and Washington seem to have focused on other climate measures, such as procurement, standards for EV charging stations, and discussions surrounding an agreement to determine a common methodology for greenhouse gas emissions, where progress is more realistic and, in some cases, more foundational to the trade relationship.
Long-Term Challenges for the TTC
While the TTC itself signals an improvement in transatlantic relations, long-term differences in approaches to policy remain. One such area is a long-term approach to China, where a divide remains on how aggressively to confront China’s nonmarket practices, despite ongoing efforts to develop new tools to address them.
Another ongoing risk for the TTC is that the Russian invasion of Ukraine continues to subsume other areas that need urgent coordination, such as joint coordination on decarbonization policies. While the Russian invasion has caused a rethinking of energy trade that has resulted in a U.S. ban on Russian oil imports, and the European Union proposed a phaseout of Russian oil and gas by the end of the year, Brussels and Washington need to work to ensure that the clean energy transition maximizes the deployment of renewable energy, such as wind and solar, while avoiding prolonging transatlantic reliance on fossil fuels.
Perhaps the largest issue looming out there is the fundamentally different ways in which the United States and the European Union approach regulation. In brief, the U.S. approach tends to be descriptive and ex post. The EU approach tends to be prescriptive and ex ante. This difference in regulatory philosophy has complicated transatlantic negotiations on a wide variety of issues for over 30 years. While the TTC has avoided some disagreements by focusing on areas where there are not yet established rules, the European Union has been moving quickly to fill those gaps, particularly in the climate and digital spaces. It will take a serious commitment by both sides to prevent cooperation in these new areas from falling prey to an old problem.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C. Emily Benson is an associate fellow with the Scholl Chair program.
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