In strengthening transatlantic cooperation on trade and technology, the US and EU need to balance various challenges, which are examined in detail below.
Bilateral vs global focus
The TTC is, first of all, designed to achieve bilateral objectives. But it also covers multilateral issues and feeds into coordination between the US and EU at other international forums. This raises questions about how the US and EU manage the trade-offs between the bilateral and global levels, and whether bilateral cooperation helps to further their multilateral aims.
The primary focus of the council is on growing the transatlantic trade and investment relationship, while also strengthening cooperation on digital issues and technology. But these bilateral discussions do not take place in a vacuum. Greater convergence on tech standards, for example, between the US and EU has global implications. Moreover, US–EU cooperation through the TTC can assist efforts on the multilateral stage, for instance, at the G7/G20. While TTC Working Group 10 on global trade challenges deals with issues facing the WTO (such as non-market economy policies and practices), broader WTO reform is outside the scope of the TTC.
With just two parties, the TTC has the potential to go much deeper and faster than other minilateral or multilateral initiatives. There is less of a risk that the principles agreed will be diluted by others. However, while it is useful for the US and EU to have bilateral discussions on issues supply-chain security, global trade challenges and technology standards, these still require cooperation with like-minded partners.
Current vs future-oriented issues
The TTC was first conceived as a reaction to past turbulences: it is both a forum for renewed US–EU engagement and a preventative process to avoid future friction on trade and technology issues. At the time of the launch of the TTC in 2021, the US and EU hoped to ‘deal with the challenges and opportunities of the future’ in global trade and technology. Putting existing disagreements aside, both sides wanted to ‘avoid […] unnecessary barriers to trade in new and emerging technologies’.
While both sides have continued to work towards these aims, since February 2022 the TTC has prioritized the need to respond to Russia’s war on Ukraine. The TTC’s existing working groups and established rapport between the officials involved have allowed for fast action to focus on Russia and paved the way for effective cooperation. One example of how the TTC has been leveraged is the ‘unprecedented collaboration on export controls’.
With the war in Ukraine potentially far from its conclusion, the geopolitical context could change the focus and/or scope of the TTC’s working groups. And while many of the initial working groups – such as those on secure supply chains, investment screening and export controls – were perceived with regard to the challenges presented by China, Russia’s invasion of Ukraine has changed the priorities. For example, Working Group 3 on secure supply chains has shifted from an original focus on semiconductor supply chains to discuss global trade issues linked to energy and food security. Meanwhile, Working Group 6 on the misuse of technology now encompasses Russian disinformation. Cooperation on sanctions was not on the initial agenda for the TTC. But, since sanctions are closely linked to export controls, supply-chain security and other aspects, the TTC is now a forum (though not the primary one) for US–EU cooperation on that subject.
Cooperating vs managing competition and tension
Since 2021 the US and EU have achieved much progress in resolving trade disagreements outside the TTC. Key examples include the Boeing–Airbus dispute, US tariffs on aluminium and steel (as well as EU countermeasures), and friction over digital services taxes. Nonetheless, in many of these cases, the arrangements reached are temporary solutions and require more work.
In addition, new sources of tension are emerging. For example, the Biden administration’s tax credits for electric vehicles (EVs) under the 2022 Inflation Reduction Act, which incentivize US consumers to buy North American-made EVs, have become a recent source of friction. US support for other ‘green economy’ products – such as batteries, hydrogen and renewable energy equipment – are also seen by the EU as discriminatory. In October 2022, the US and EU launched a taskforce on the Inflation Reduction Act to address concerns raised by the EU in relation to the act.
Although the US and EU have agreed to cooperate on creating secure semiconductor supply chains, American and European firms ultimately compete over access to critical inputs and leadership in the development of the technologies. Regarding the latter, there is a risk of a subsidy race between the US and the EU – for example, via the proposed EU Chips Act and the US CHIPS and Science Act of 2022. The former seeks to mobilize €43 billion in investment for the EU’s semiconductor sector by 2030, while the latter provides $52.7 billion for American semiconductor research, development and manufacturing. Both sides have vowed to ‘avoid […] subsidy races’ and discussions in the TTC can help. But such an outcome is far from assured.
Although the US and EU have agreed to cooperate on creating secure semiconductor supply chains, American and European firms ultimately compete over access to critical inputs and leadership in the development of the technologies.
In October 2022, the US imposed controls on semiconductor technology exports to China, and it is willing to compel foreign partners to fall in line through extraterritorial measures. This step could have implications for the competitiveness of the EU semiconductor industry.
The EU’s legislative package on digital issues and plans for a carbon border adjustment mechanism (CBAM) could also have implications for transatlantic trade and economic openness. Other examples concern the EU’s planned anti-coercion instrument, which would allow Brussels to impose trade and investment restrictions against economic rivals like Beijing and even Washington as a tool of last resort, or the EU’s new Foreign Subsidies Regulation, which will give the European Commission extensive powers to investigate and redress alleged distortions caused by subsidies granted by non-EU countries. The TTC could be required to defuse such tensions.
Promotion of democratic values vs the rules-based international order
The previous point leads to the wider framing of the TTC. The US has previously pushed for a clear division between democracies and autocracies. In contrast, the EU has traditionally differentiated between those countries that respect the rules-based international system and those that do not – thus allowing for partnerships with certain countries that are significant economic players but have non-democratic regimes, such as Vietnam. But since Russia’s invasion of Ukraine, the EU is increasingly willing to back the US in its eagerness to oppose authoritarian regimes.
More recently, the US has taken a more nuanced approach: the National Security Strategy published in October 2022 distinguishes between autocracies with revisionist foreign policies (and that are willing to use force to reshape the existing international order) and those working within the existing order. This approach acknowledges that many non-democracies agree with democratic countries on preserving the autonomy and rights of less powerful states.
The TTC seeks to combine both approaches. Recent statements emphasize that the transatlantic partnership is based on a shared commitment to freedom, democracy and respect for human rights, while calling out ‘authoritarian policies’. The US and EU also state that they ‘oppose actors who threaten the multilateral rules-based order and fundamental principles of international law’.
Rules vs tools
US trade representative Katherine Tai has indicated a shift in US policy from seeking to shape trade rules to developing trade tools for use if other countries do not play by the rules or if those rules take too long to enforce. This represents a shift away from decades of US trade policy. In part, the shift reflects the ongoing US move from pursuing traditional free trade agreements in favour of new models of cooperation via flexible platforms such as the TTC and IPEF. It also reflects the ongoing uncertainty about the WTO’s ability to uphold the rules-based order. With that organization still in crisis, trade ministers committed in June 2022 to ‘conduct discussions with the view to having a fully and well-functioning dispute settlement system accessible to all Members by 2024’. But it remains to be seen if the US will give up its current hold on the appointments and reappointments for the WTO appellate body. Meanwhile, on the EU side, the anti-coercion instrument presents a new tool. In short, with the rules-based order under attack and in light of ongoing domestic concerns about trade agreements, the shift in emphasis from rules to tools will likely continue.
The TTC’s nature as a forum for cooperation (implying a focus on tools) rather than negotiation (implying a focus on rules) fits well with this shift. To address the most pressing current trade challenges, such as supply-chain resilience, the TTC – with its emphasis on information exchange to anticipate shortages and efforts to increase production while avoiding subsidy races – might be better suited than negotiations for a traditional free trade agreement. However, a transatlantic trade agreement could help with diversifying sources of supply in the long term.
Technical vs political
The work of the TTC tries to balance deep technical collaboration between officials and high-level political engagement. The bi-annual ministerial-level meetings of the TTC have succeeded in gaining public attention and signalling political will. But it is at the working group level where officials carry out the technical work needed to turn political decisions into action. Examples include collaboration over export controls and alignment in technical areas like EV-charging technologies.
At the same time, the TTC is becoming more openly political. The TTC statement from May 2022 mentioned Russia 56 times, and indicates that the TTC members realize the need to stand up for their shared values and defend the rules-based international order. The December 2022 meeting of the TTC was more equally focused on Russia and China. While the former was mentioned 10 times in the joint statement, the latter was explicitly referenced twice and indirectly implied several times in sections dealing with non-market economic policies and practices, economic coercion and investment screening.
The TTC has also been politicized by events outside of its scope. For example, after the announcement of AUKUS (a security agreement between Australia, the UK and the US that supplanted a submarine deal between France and Australia), France’s strong objections raised doubts about whether the first TTC meeting would go ahead. In the end, the meeting proceeded as planned.
