Vaccines and the Trade and Technology Council

May 23, 2022

This week, I want to discuss two issues that had their moments last week—the vaccine waiver issue and the second EU-U.S. Trade and Technology Council (TTC) meeting.

On the vaccine issue, you may recall that a compromise emerged from talks among the European Union, United States, India, and South Africa. No one seems to like it, which means it is probably a good compromise. However, one issue has moved to the fore which provides an interesting lesson in negotiating strategy. A footnote in the proposal would effectively exclude China from taking advantage of the waiver. The Chinese reaction has been classic—objecting to the form and accepting the substance. China demanded that the footnote be removed so it would not be excluded, but at the same time, announced that it would not seek to use the waiver. That would be face-saving for China, which would no longer be singled out, but it would also give developed countries what they want. Sounds like a deal, right?

Not so fast. At that point the United States stomped all over it by saying it wanted “clarity” and insisted language excluding China remain. There are several ways to interpret that. If you are a cynic, you could argue that the United States never really supported a waiver, despite its previous statements, and this is just a clever way to get rid of it and blame China. You could also reasonably argue that the United States does not trust China to keep its word and wants a binding provision in the agreement. Either way, if you are a waiver opponent, you are probably smiling to yourself as the whole issue starts to go down the drain.

Of course, if you favor the waiver, you should be annoyed at the United States snatching defeat from the jaws of victory and torpedoing a genuine compromise. You should also be annoyed at the administration’s failure to understand and take advantage of basic Chinese negotiating tactics. The irony of all this is that it is too late—the issue should have been decided two years ago when it mattered. The debate also misses the key point: the issue now is not vaccine manufacturing, but distribution, and the proposed agreement does not deal with that.

Moving west from Geneva to Paris, the TTC had its second meeting and produced a lot of words—at least 47 pages of conclusions and recommendations. My colleague Emily Benson and I wrote a short piece assessing progress in the TTC for those particularly interested. Much was said, but much was left unsaid as well.

It is important to remember that the point of the TTC is not to address the many outstanding disagreements the United States has with the European Union, but rather to focus on new issues where the battle lines are less clearly drawn and agreement might be easier to reach. The best example of where that worked was expanded cooperation on sanctions and export controls in response to Russia’s invasion of Ukraine. Both sides really stepped up, coordinated their strategies, and agreed on some of the most far-reaching changes since the end of the Soviet Union, which, by most accounts, appear to be having an impact.

Even here, however, there are unanswered questions, most prominently whether these agreements are a one-off event or whether they will be similarly applied to China in the event of an invasion of Taiwan, China violating the Russia sanctions, or simply a deterioration in bilateral relations.

The two sides also agreed on more cooperation on developing electric vehicle standards and supply chain management—more transparency and early warning and monitoring mechanisms, particularly on semiconductors. Left unanswered was the question of how much information from private companies the European Union and the United States will legally be able to compile and share, including on subsidies for chip manufacturing. Both sides want to avoid an arms race there, but that will require setting aside short-term national interests in order to cooperate effectively.

Digital regulation was another area of progress—the establishment of a strategic standardization information (SSI) mechanism to promote cooperation on technology regulation along with agreement to push forward on OECD Artificial Intelligence Recommendations, although another important area of controversy, the European Union’s Digital Markets Act, was not addressed and remains an issue.

Progress was less notable on climate issues, partly because the United States remains considerably behind the European Union in its public debate on climate change and in building consensus on what to do about it. The European Union is moving forward with its carbon border adjustment mechanism (CBAM)—one of many areas where it has exerted regulatory leadership—putting the United States in the position of playing catch up. That could end up in cooperation or confrontation—see our recent paper on that subject—and the TTC can play a role in making sure it is the former, not the latter.

Finally, lurking behind the happy talk and focus on areas where both parties largely agree, is the reality that the two sides approach regulation in fundamentally different ways. The U.S. approach is most often descriptive and ex post; the European Union’s prescriptive and ex ante. You can see the latter clearly in its digital regulations. Whether the strategic standardization information will fall into the same philosophical trap remains to be seen.

So, the parties made progress, but most substantive deliverables remain outstanding. It will fall to the third meeting later this year how significant a contribution to the transatlantic dialogue the TTC will be.

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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