Editor’s Blog: Produced in collaboration with the EU Buzz team.
The European Union and the United States are powerful giants in the global economy and on the international stage. Both are ambitious and competitive, both are also protectionist in their own ways. Each is aware of the need for comprehensive and close collaboration to counterbalance other emerging super powers whose global ambitions, and business ethics, do not represent the democratic values of either the EU or the US. Thus, it is a surprise that, still today, there is no dedicated trade agreement between the EU and the US.
The Transatlantic Trade and Investment Partnership (TTIP) negotiations, launched in 2013, ended up with protests on the streets of Brussels against any agreement. By the end of 2016, negotiations were shelved. Trying again, under a different guise, in December 2020, the European Commission proposed the creation of an EU-US Trade and Technology Council (TTC), to facilitate trade, expand investment, develop compatible standards, boost innovation and strengthen technological and industrial leadership, including overseeing a values-based digital transformation.
Over recent years, transatlantic trade and technology collaboration between the two parties has declined. It is fair to say that, the relationship was tense under President Trump, and has shown little signs of improving under the Biden administration. Nevertheless, this has not stopped investment. In 2019, US companies invested €2,003 billion in the EU, around 30 % of all foreign investment; and European businesses invested €2,161 billion in the US, almost 45 % of total foreign direct investment. These figures outstrip relationships with other countries, and even regions, and hence it is vital for the EU and US to strengthen their ties, to give further confidence to investors.
The Trade and Technology Council will have at its helm high-level politicians, underpinned by ten working groups of experts from both sides, who will formulate proposals on common standards, resilient supply chains, tech regulation, global trade challenges, climate and green tech, investment screening and export controls. It is anticipated that the TTC will bridge existing gaps and focus on strategic areas to identify new ways of cooperation. The question is, can the TTC overcome the pre-existing, unresolved problems of the past?
Specifically, the digital economy, products and especially services, is important in generating a value-added component of trade as a key element of global value chains. This is borne out in numbers, as the US, with sales of €167 billion, was the largest supplier of digitally enabled services to the EU in 2019. Similarly, the EU exported €130 billion to the US. On top of services, data flows, were approximately 55 % higher cross Atlantic than transpacific. These transatlantic data flows are the fastest and largest in the world.
The World Economic Forum estimates that, as much as 60 % of global GDP could come from the digital economy by 2022. The US and EU, therefore, need to be collaborating to ensure democratic principles shape this digital space. Setting common standards will also be required to off set the increasing influence of China, including against its proposed digital ‘belt and road initiative’. China is investing substantially into advanced technologies, both financially and through its diplomatic soft-power – something that has been witnessed with its attempts to dominate the 5G market.
The first official meeting of the TTC was held on 29th September 2021, in Pittsburgh, USA, co-chaired by European Commission Vice Presidents Margrethe Vestager and Valdis Dombrovskis, and on the US side, US Secretary of State Antony Blinken and Secretary of Commerce Gina Raimondo and Trade Representative Katherine Tai.
The initial “words” are promising, if not all encompassing: “We intend to collaborate to promote shared economic growth that benefits workers on both sides of the Atlantic, grow the transatlantic trade and investment relationship, fight the climate crisis, protect the environment, promote workers’ rights, combat child and forced labour, expand resilient and sustainable supply chains, and expand cooperation on critical and emerging technologies. We stand together in continuing to protect our businesses, consumers, and workers from unfair trade practices, in particular those posed by non-market economies that are undermining the world trading system.”
Continuing: “We share a strong desire to drive the digital transformation that spurs trade and investment, benefits workers, protects the environment and climate, strengthens our technological and industrial leadership, sets high standards globally, boosts innovation, and protects and promotes critical and emerging technologies and infrastructure. We intend to cooperate on the development and deployment of new technologies in ways that reinforce our shared democratic values, including respect for universal human rights, advance our respective efforts to address the climate change crisis, and encourage compatible standards and regulations. We intend to cooperate to effectively address the misuse of technology, to protect our societies from information manipulation and interference, promote secure and sustainable international digital connectivity, and support human rights defenders.”
….And “We seek inclusive economic growth that benefits all of our people, and intend to make a particular focus on inclusive growth for middle class and lower income people on both sides of the Atlantic. We also have a particular focus on opportunities for small and medium-sized enterprises.”
There was much more, nothing was left out, but how much of it will now be translated into action, remains to be seen.
The EU has prioritised the digital agenda, trade and its position in the world. It is highly respected for its regulatory expertise in the digital economy, and this provides a valuable opportunity for the EU-US Trade and Technology Council to lead the way internationally. By creating more widely accepted regulatory conditions for sustainable trade and an ethical digital economy, there are opportunities to grow, address climate change, and be more sustainable.
However, the EU and the US must not fall into the same trap as they did with the Transatlantic Trade and Investment Partnership. They cannot operate in isolation, they must involve business, and especially small to medium sized enterprises(SMEs), trade unions and civil society. They must not attempt to bring in regulation through closed negotiations – They must uphold the value of transparency. These conditions will be non-negotiable for European civil society.