Europe Reset?

The last week or so has seen a flurry of activity from the European Union proposing a reset in transatlantic relations. A cynic would probably observe that this is an exercise in reinventing the wheel, since the Obama administration proposed the same thing in Obama’s second term, and other presidents before him have launched efforts to resolve our many outstanding trade differences. The Obama effort did not get very far, largely because of European resistance among both their leaders and their public, but it was a good idea, as is the EU initiative. Hopefully, this initiative won’t meet the same fate as the last one, although—spoiler alert—I am not optimistic.

The main paper from the European Commission, “Joint Communication to the European Parliament, the European Council, and the Council,” published on December 2, proposes “a new EU-US agenda for global change.” Here is the rhetorical premise:

With a change of administration in the US, a more assertive Europe and the need to design a post-corona world, we have a once-in-a-generation opportunity to design a new transatlantic agenda for global cooperation – based on our common values, interests and global influence. This should be the linchpin of a new global alliance of like-minded partners. This comes at a time when there is a commonality of outlook and priorities on domestic and international agendas between the incoming US administration and the European Union.

Much of the document is devoted to common action on the Covid-19 pandemic and on the environment, but I only have 900 words, so I will focus on the technology and trade section. There, the rationale is also clear:

…the EU and the US need to join forces as tech-allies to shape technologies, their use and their regulatory environment. Using our combined influence, a transatlantic technology space should form the backbone of a wider coalition of like-minded democracies with a shared vision on tech governance and a shared commitment to defend it. To deliver on this, the EU must stay course for its own tech goals and ambitions as part of Europe’s digital decade.

The proposed instrument for this noble goal is an EU-U.S. Trade and Technology Council (TTC), which is appears will primarily focus on issues involving digital trade and cyber security. There is nothing wrong with a presumably high-level forum for discussion, but I think the EU initiative glosses over two fundamental issues that will make progress difficult.

The first is that the European Union, having discovered first-mover advantage in the case of the General Data Protection Regulation, clearly sees itself as a regulatory leader, even if it is not a technology leader. They are moving ahead on their own Digital Services Act and Digital Markets Act which together will address a broad range of issues including policing content, platform liability, data flows, digital governance, and competition policy. They are also working on their own regulatory approach to artificial intelligence (which will likely conflict with their existing privacy regulation), and, as readers know, some of the member states have taken the lead on developing a digital services tax primarily targeting U.S. companies.

The irony is that Europe is not the leader in any of the subject technologies, although the failure of the United States to develop coherent policies of its own in these areas could well mean that EU regulations end up being the default option. Creating a forum to discuss our differences is a good idea so long as Europe does not view it simply as a means to pressure the United States to adopt European standards, and the United States comes to the table with positions of its own. One of the fundamental rules of politics is that you can’t beat something with nothing, and right now the United States has nothing, despite having the biggest stake in the outcome.

The other fundamental issue is the growing call in Europe for “strategic” or technology autonomy. It is not entirely clear what that means—and it may mean different things to different Europeans—but it appears to reflect a determination to free Europe from what is viewed as domination by large U.S. high-tech companies. Here, the same rule of politics applies, but in this case the Europeans have nothing—though that does not seem to be stopping them from trying to punish U.S. companies for their success and Europe’s failures.

The tragedy of that view is that it misses the point—the United States and the European Union both face the same challenge, which is China, and that challenge is too big for either of us to take on alone. President-elect Biden knows that, which is why he is so focused on building a coalition to confront China’s anti-market activities. The European Union gives lip service to that plan, but though their lips say “yes,” their eyes say “not so fast.” They continue to lag in recognizing the seriousness of the Chinese challenge, although the repressive policies of the Chinese government in Xinjiang and Hong Kong—an affront to democracies everywhere—are pushing them in our direction.

The EU initiative presents an important opportunity to try for a reset, and the Biden administration would be wise to take the European Union up on its offer. A reset is something both sides want, but both will have to go into it with more open minds than they have shown so far if it is to succeed. 

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

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