Functional transatlantic trade and technology council emerging

Published : 31 May 2022 08:36 PM

The principle of confrontation has created an osmotic effect on both sides of the Atlantic. Three months after the beginning of the East European crisis, a sense of urgency has emerged underlining the need for a transatlantic sense of purpose.

In the third week of May, at the end of the second Ministerial Meeting of the Trade and Technology Council (TTC) in Saclay on 15 and 16 May, a Joint Statement was released identifying areas of possible cooperation across the TTC that had earlier been discussed at length in Pittsburgh.

 Supply chain pressure relief, export controls, investment screening, the coordination of trade responses to non-market policies and practices have been underlined. Nevertheless at the same time anxiety has also been noticed with regard to other relevant dimensions like- Transatlantic Collaboration on Artificial Intelligence management tools, SMEs’ digital transformation and climate issues.

The key message of the second TTC meeting can however be found in the words of US Trade Representative Katherine Tai, who after the ministerial meeting reiterated that the use of the TTC as a cooperation framework still appears to be only in its initial stages and requires that both the EU and the USA carry on their structuring endeavour in the near future- and try to find least common denominators and generate trust pertaining to contentious areas that would overcome challenges and directly connect policy communities on both sides of the Atlantic.

At the outset, for the US, the TTC was about containing China. The EU’s ambition on the other hand was to pull the US closer to European values in platform regulation and the green transition and overcome trade irritants. Their efforts, till now, had been unable to discover a common platform. 

Now, because of the evolving circumstances and also difficulties associated with NATO, the EU and the US appear to have found a common direction in the TTC and, perhaps, according to some analysts “more fundamentally, a sense of shared identity.”

Both sides across the Atlantic now feel that the best way for the West to tackle the authoritarian alternative, would be to revive economic security cooperation across the board. It has now been agreed that technology and trade are at the crux of liberal democracy’s future through their compounding role in prosperity, security and sovereignty.

It may be recalled here that the EU and US have been working together quite well on export controls over the past months, but it has only been a promising start. This has led this latest meeting to underscore that despite the hints of some success it has not been enough. This has led analysts to suggest that the TTC’s work now needs to go deeper and be more concrete across all ten working groups.

It has been pointed out that trade barriers, such as the tariff-rate quotas that still prevail in steel and aluminium, prevent long-term investment decisions in Europe and the US and contribute indirectly to their import dependence on China. This has led to remarks by strategic economic analysts that the West’s supply chains will be more resilient if they are effectively greened with Western technology. In this context, achieving standards for trustworthy AI would fundamentally prevent the collapse of the Western economic, societal and democratic fabric. That is being perceived as a good step forward.

Annika Hedberg, Stefan Sipka, Guillaume Van der Loo, Frederico Mollet, Georg Riekeles, Andrea García Rodríguez, Simon Dekeyrel and Evin Jongen-Fay who have all been carefully monitoring the evolving chain of Western thought have pointed out that the EU and US are both trying to bring transatlantic coherence to their domestically driven initiatives to increase supply chain resilience, particularly for semiconductors and raw materials. 

This is understandable as supply chains are deeply globalised, in most cases spanning across not only EU–US jurisdictions but also other countries outside their borders in different parts of the world-in this age of digitalization.

The participants in this latest meeting also appear to have understood that international cooperation on supply chains is necessary if the drive towards more resilience is not to be rendered ineffective or counterproductive. At the same time the connotation has emerged from the discussion that within this paradigm  concrete joint tools to actively manage supply chain risks with commitment are clearly still underdeveloped.

Some participants also appear to have drawn attention to the fact that there are a number of areas, like cleantech or semiconductors, where attempts to onshore production still create considerable tension between the EU and US because of underlying protectionist policies. This scenario has been a source of anxiety and has eventually led to the TTC promising the development of joint tools to coordinate monitoring and information flows to avoid bottlenecks building up, such as an early warning pilot for semiconductors. Such coordinating action could definitely help address poor transparency and information flows in the international private sector. However, it is not yet clear as to whether new policy initiatives will remain predominantly domestic.

Analysts monitoring carefully different aspects associated with the TTC’s ambition on supply chains, standards, AI, 5G and 6G and other digital policies – are doing so with care. Some among them, associated with the European Policy Centre have remarked that the Joint Statement “is essentially an ambitious declaration of intent on strengthening information exchange and coordination in investment screening, areas like ‘trade and labour’ and ‘trade and climate’, and ‘non-market policies and practices” . They however agree that the focus of the TTC is currently on non-tariff barriers, supply chains, and digital and regulatory issues, which for legal and political reasons are hard to cover in binding treaties. 

It has also been pointed out that “sensitive trade files are largely left outside the scope of the TTC, including how to deal with the remaining US Section 232 tariffs on EU exports of steel and aluminium and the finalization of a new data transfer agreement”- associated with critical technologies. Nevertheless, some optimism has been created through the discussions regarding how to possibly prevent trade irritants, such as on the EU’s numerous new and envisaged autonomous trade measures covering public procurement, foreign subsidies, the Carbon Border Adjustment Mechanism or anti-coercion. 

This has persuaded some to believe that the frequent meetings of the TTC Working Groups build trust and can lay the groundwork for sectoral agreements at the bilateral or multilateral (WTO) level. Concrete deliverables are consequently being expected by the next TTC meeting to be held in the US in Decem

ber 2022.

The last meeting is also being viewed not only as an example of commitment to the principles of the Declaration for the Future of the Internet that will recognize the urgency to protect a free and open cyberspace but also the possibility that the EU and the US will also cooperate on the governance of new technologies and emerging tech like AI. By preventing trade disputes and reducing the risks of technology misuse, such cooperation will definitely boost research and innovation and help cover the innovation gaps on both sides of the Atlantic.

Annika Hedberg, Stefan Sipka, Guillaume Van der Loo, Frederico Mollet, Georg Riekeles, Andrea García Rodríguez, Simon Dekeyrel and Evin Jongen-Fay have also noted that the Joint Statement “rightly recognizes the importance of the green transition and the roles of trade and international cooperation in supporting climate action; addressing challenges related to biodiversity, environmental degradation and pollution; and enabling the global transition to a circular economy.

Nonetheless, more flexibility will be required in the following two dimensions: (a) the recognition of solar power as a central component to a net-zero Western economy, which would reduce energy costs and bolster energy security across the Atlantic. There has to be more opportunities to cooperate to advance the clean energy transition and the circular economy and also address supply chain challenges; (b) the envisaged EU–US collaboration on food security could be aligned with long-term sustainability considerations. This will help to reduce greenhouse gas emissions from the agricultural sector, halt biodiversity loss, ensure animal welfare, and build on nature’s potential to support climate action.

It is a very hard task that has been undertaken by the TTC. Nevertheless, it needs to pursue the desired course of action it has set out and be ambitious when moving forward. Other developing and developed countries – from Asia, Africa and Latin America- believe that the TTC needs to overcome the diversified challenges it has promised to tackle and open up the possibility of new areas for collaboration.

The framework has started to prove its ability to connect policy communities not only across the Atlantic but also across the world. Such coordination will prove essential long after the immediate geopolitical crisis has waned. 

Muhammad Zamir, a former Ambassador, is an analyst specialized in foreign affairs, right to information and good governance.