The Fifth Ministerial of the U.S.-EU Trade and Technology Council

Audio Brief

A short, spoken-word summary from CSIS’s Emily Benson on her Critical Questions, “The Fifth Ministerial of the U.S.-EU Trade and Technology Council.”

Audio file

Introduction

In January 2024, the European Union and United States convened in Washington, D.C. for the fifth ministerial conference of the U.S.-EU Trade and Technology Council (TTC). This latest meeting comes as both sides head into major elections. It is rumored that a “capstone” ministerial will take place in Brussels in April.

Q1: What is the TTC?

A1: The TTC is an ambitious bilateral framework that consists of 10 working groups. These groups span topics such as green technology, cooperation on export controls and investment screening, and supply chain security. The TTC was initially erected not as a replacement to the Transatlantic Trade and Investment Partnership (TTIP), a comprehensive trade agreement that failed to garner significant political buy-in on both sides of the Atlantic, but to rehabilitate the EU-U.S. relationship following the Trump administration. This is not quite a replacement for a TTIP that would have included market access provisions and tariff liberalization.

During the Trump administration, the White House downgraded the embassy status of the European Union’s Delegation to the United States. Then president Trump also threatened to withdraw from NATO. (Legislation passed in the U.S. Congress in 2023 now forbids the U.S. president from unilaterally withdrawing from NATO without congressional consent.) More recently, on the election campaign trail, presidential hopeful Trump has said that under his second term, the European Union would be “an enemy” and that, along with China, the European Union would be subject to significant tariff hikes. Policy positions like these led the European Union to create its Anti-Coercion Instrument, intended to serve as the bloc’s equivalent of the United States’ broad Section 301 tariff remedy.

These political conditions highlight the importance of building bilateral channels for communications. The TTC is chaired by high-ranking officials on each side—Secretary of State Antony Blinken, Secretary of Commerce Gina Raimondo, and U.S. Trade Representative Katharine Tai on the U.S. side, and High Commissioner Josep Borrell, Executive Vice President Margrethe Vestager, and Executive Vice President Valdis Dombrovskis on the EU side. The fifth TTC ministerial was slated to occur in early December in Washington, but Secretary Blinken’s travel schedule in the Middle East set back the ministerial. Nonetheless, that each ministerial has garnered such significant buy-in from principals speaks to the importance of this architecture.

Although high-level participation makes for splashier headlines, the TTC has served a purpose at the staff level. As the Biden administration assumed office, the TTC provided a channel for staff on both sides of the Atlantic to communicate bilaterally, facilitating back-channel dialogues that may otherwise not have existed, at least in this particular quality and quantity.

Q2: What outcomes has the TTC produced?

A2: Despite the obvious utility of the TTC overall, it has been set back by repeated failures to produce concrete and binding outcomes. In December 2022, the parties released the Joint Roadmap for Trustworthy AI and Risk Management. By the fourth ministerial in May 2024, the roadmap had progressed, creating three expert groups on artificial intelligence (AI) and establishing a list of 65 AI terms, which creates a shared AI terminology that improves transatlantic cooperation over AI regulation.

Another prominent theme of the TTC has centered around the climate and trade nexus. The first TTC ministerial statement focused, perhaps too presciently, on the need for the parties to identify a common methodology for calculating carbon intensity of traded goods. The European Union has built a robust methodology that in part results from its Emissions Trading Scheme (ETS). The lack of a robust emissions trading system in the United States has stunted its ability to calculate carbon intensity. This mismatch would continue to resurface in other negotiations, particularly those relating to the Global Arrangement on Sustainable Steel and Aluminum (GASSA), which seeks concurrent incentives for green trade, resolutions to Trump tariffs, and methods for combating Chinese overcapacity.

In August 2022, the United States passed the Inflation Reduction Act (IRA), a historic climate and energy bill that included trade provisions that the European Union regards as unjustified and violative of World Trade Organization rules. Disagreements over the IRA in part led the parties to stand up the Transatlantic Initiative on Sustainable Trade (TIST). This high-level dialogue served as a new layer of a working group that was initially staffed by the United States’ G7 sherpa.

The Cleantech Group and Breakthrough Energy point out in their 2023 report, while transatlantic investments in green technology are rising, there are still major barriers impeding stakeholders' ability to collaborate effectively. One of the policies suggested to create a more stable green transatlantic marketplace involves ensuring forums like the TTC create space for policymakers and stakeholders to meet and discuss their needs. At the January 2024 TTC, the TIST seemingly incorporated this suggestion, holding an all-day side event with stakeholders hoping to build a green transatlantic marketplace.

Q3: How do investment screening and export controls fit into the TTC?

A3: Two working groups have produced particularly close cooperation: Working Group 7 on export controls and Working Group 8 on investment screening. Export controls have moved to the forefront of the transatlantic trade and technology agenda, particularly as the United States flexes its unilateral and extraterritorial muscles, inviting an EU response. Following the application of the October 7, 2022, export controls on advanced AI chips to China that directly affected Dutch exports of ASML machine tools to China, the European Union faced difficult questions about how to deal with export controls overall. Export controls in the European Union are particularly complicated since national security and investment security remain the purview of member states, whereas trade policy is firmly within the remit of the European Commission. The United States has also led discussions within the G7 and TTC over the need to stand up a new tool that would screen and, in some cases, ban outbound investment in high-tech sectors in countries of concern.

In January 2024, the European Union unveiled its new economic security strategy (a further articulation of its June 2023 release), which included dedicated portions on export controls and investment screening. In short, the European Union seeks to consolidate some degree of authority over export control lists in a bid to ensure that EU export controls function in close concert with the overall goals of the EU single market—in short, to ensure a level playing field within the European Union.

Both parties face difficulties in promulgating export control rules and list updates because the Wassenaar Arrangement—the multilateral export control regime for dual-use items—is consensus-based, and Russia’s membership in it continues to obstruct additional progress. These circumstances force the parties to contemplate what comes next. A surprising feature of the TTC talks in Washington in January 2024 centered around the idea of proceeding with a “Wassenaar minus one” strategy, whereby Wassenaar Arrangement members would essentially kick Russia out of the organization or somehow continue as is but in Russia’s absence. Commissioner Dombrovskis mentioned the potential for increased cooperation on this issue during an event at CSIS, remarking on Wassenaar minus one, “We’re also looking at the question what we do now with multiple multilateral export control regimes, like, for example, Wassenaar, where Russia is basically blocking decisions and basically that we could be implementing those, let’s say, consensus minus one decisions then uniformly at the European level.” As CSIS has written, there is scant legal precedent for kicking a country out of an international institution. To the extent that is possible legally, excluding members can risk geopolitical blowback from other members that may wish to remain non-aligned.

An alternative pathway is for the European Union and United States is to combine their economic security agendas—including export controls, investment screening, and supply chain security—into a new institution that enhance rules and order in an otherwise increasingly autarkic economic security environment and institutionalize the transatlantic toolkit for carrying out joint economic security objectives.

On outbound investment, the European Union continues to maintain that such an instrument could hold utility but that the idea merits additional inquiry throughout the bloc. Achieving broad member state buy-in to the instrument will remain difficult for the foreseeable future.

Q4: Are the European Union and United States aligned on semiconductor strategies?

A4: Another surprising feature of the January 2024 ministerial conference was the focus on perceived overcapacity of legacy node chips. Particularly in the United States, there has been a significant uptick in conversations recently about Chinese chip overcapacity and what to do about it or whether a confluence of problems warrants a more complex response. Excess capacity could result from

  1. reduced Chinese imports into the Chinese market, resulting in global surplus;
  2. a downturn in domestic demand for Chinese-produced chips, resulting in global overcapacity;
  3. overproduction among non-Chinese producers, potentially in anticipation of future U.S. export controls;
  4. an extant cyclical downturn in the industry after a corrective over-supply following the Covid-19 shortages; or
  5. Chinese state subsidies.

It is most likely that current semiconductor market conditions result from a combination of the above factors. Nevertheless, Commissioner Vestager hinted during her visit to Washington that the parties were keen on examining overcapacity, potentially foreshadowing the application of trade remedies. The United States and European Union are similarly engaging in ways to combat Chinese overcapacity of steel and, more recently, electric vehicles. That there is already such alignment on semiconductors denotes closer cooperation on the U.S. and EU chips packages. To date, the European Union and United States have struggled to make meaningful progress de-conflicting as they deploy chips funding and in so doing risk losing an opportunity to maximize strategic gains from these packages.

Q5: Should the parties dissolve the TTC or institutionalize it?

A5: It will be monumentally challenging for both parties to meet consistently during an election year. Nevertheless, the TTC has produced meaningful foundational work on far-ranging policies that merit institutionalization. Recognizing the utility of the framework, the U.S. Select Committee on Competition with the Chinese Communist Party called out the TTC in its report on the need to “support participation in the U.S.-EU Trade and Technology Council (TTC) to promote joint U.S. and EU competitiveness and prosperity.”

Moreover, while some onlookers are quick to point to tepid outcomes from the TTC, the TTC has shown tremendous resilience in light of major crises that include the Russian invasion of Ukraine, the ongoing Israeli war in Gaza in response to Hamas attacks, Houthi attacks in the Gulf of Aden, and mounting pressures in the Indo-Pacific. Amid this geopolitical backdrop and accelerating effects of climate change, the transatlantic alliance faces two options. The first is to attack these circumstances alone and as competitors. The second is to band together and to reinforce work underway in other institutions and groupings, ranging from the G7 and G20 to UN work on climate change. In a time as precarious as this, the transatlantic alliance has an opportunity to reaffirm its global leadership through institutionalizing a diplomatically creative framework.

Emily Benson directs the Project on Trade and Technology and is senior fellow with the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

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Emily Benson
Director, Project on Trade and Technology and Senior Fellow, Scholl Chair in International Business