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An attempt to build a transatlantic framework for cooperating on trade and technology looks cursed before it’s even started.
Even before a transatlantic flare-up over submarines, which now looks likely to delay the first session of the Trade and Tech Council planned for September 29, Washington and Brussels had widely diverging visions of what they wanted out of this new diplomatic initiative.
China was a huge divider. While Washington saw the format as a prime opportunity to gang up against China on forging common tech and trade standards, the European camp was at pains to play down any sense that Beijing was a target. The EU was also frustrated over how Washington was using the new forum to steamroller forward with its own tech agenda.
As far as next week goes, those differences may prove academic as the European Commission is ambiguous about whether the discussions will even take place thanks to French fury over a new defense alliance between the United States, Australia and the U.K., dubbed AUKUS, that torpedoed a multibillion-dollar French submarine deal with Canberra.
A European Commission spokesperson on Tuesday said Brussels was still “analyzing the consequences of the announcement on AUKUS in terms of its possible impact on the date” for the trade and tech meeting. EU Internal Market Commissioner Thierry Breton meanwhile hinted at a delay by saying: “It is probably time to pause and reset our EU-U.S. relationship.”
For those in favor of closer cooperation, derailing the Pittsburgh summit sounds like a waste. The more free-trade-minded countries are already fuming about the way the French try to link their security files with the EU’s trade agenda, with the EU-Australia trade deal now in peril because of the French pique.
“This is too big to fail,” said one EU trade diplomat. “Let’s hope that it’ll be a success, there shouldn’t be any questions on it.”
Europe’s sudden misgivings over the Trade and Tech Council (TTC) are peculiar in that it was the EU that initially proposed the initiative back in December.
European diplomats seized upon Joe Biden’s victory in last year’s U.S. presidential election to patch up the battered transatlantic relationship after Donald Trump’s presidency. It took some time for Washington to reciprocate. When Biden agreed to the alliance at a June summit, Brussels saw it as a victory.
But from the beginning, Brussels and Washington had different expectations.
China is key.
“Ultimately, for the U.S., it’s all about China. If the EU doesn’t want that — if EU countries see this as a Trojan horse for the bloc to buy into the U.S. strategy on China — that’s a pretty fundamental issue,” said Paul Triolo, head of geo-technology at consultancy Eurasia Group.
A draft statement officials were preparing to be adopted in Pittsburgh next week, dated September 20 and seen by POLITICO, listed a number of concrete actions to respond to “the challenges posed by non-market economies,” such as sharing information and “exploring ways of working together and with other partners with a view to addressing the negative effects of such policies and practices.”
Parts on artificial intelligence and investment screening also bore the hallmarks of the U.S.’s China policy, Triolo said.
But Brussels saw this as only a part of the discussion and didn’t want to use the TTC purely to clobber China. EU countries, especially economic powerhouses France and Germany, are hesitant to push back too hard against China because of their significant economic ties to Beijing.
As negotiations intensified over the last few weeks, Brussels pushed back against the anti-China stance.
“The TTC is not a dialogue on China,” the European Commission’s Rupert Schlegelmilch told a civil society gathering last week. The same message was conveyed to MEPs and trade diplomats in meetings behind closed doors, several officials who attended those meetings said. European Commission Executive Vice-President Margrethe Vestager also told POLITICO recently that the transatlantic alliance was not aimed against China.
Europe has a history of not wanting to confront China too hard, and of riling the U.S. in the process. When China wanted to claim market economy status at the World Trade Organization, Washington dismissed the notion and was irritated by the EU’s fuzzy response. More recently, Brussels at the end of last year rushed to close an investment deal with China just before Biden took office, raising doubts in Washington as to whether the White House will ever be able to see eye-to-eye with Brussels — and indeed Berlin — on China’s role.
Trade and tech agenda
Brussels had originally hoped to pressure the Americans into following Brussels’ regulatory line on tech and trade.
But during the process, Washington flexed its muscles in the early stages to press its own priorities. It pushed for a new political deal on transatlantic data flows to be adopted on the margins of the TTC meeting, to replace the so-called Privacy Shield agreement, which was struck down by an EU court ruling last year. But the suggestion triggered frustration with EU officials, who stressed negotiations on such a new legal framework were far from done.
The U.S. also pushed to cut off trade in digital services with China by inserting mentions of democratic values in tech regulation, in line with Washington’s years-long campaign to stop Chinese tech from overtaking that in the West.
When it came to more immediate domestic interests in Europe and the U.S., the two sides seemed to struggle to come up with ambitious plans.
Officials wanted to put forward a joint, transatlantic solution to the crisis in the semiconductor industry after supply chain shocks hit European carmakers, U.S. consumer tech makers and many others in the past year. But draft language from earlier this week showed the sides were just as concerned about potential pitfalls as they were about benefits.
The chips partnership “must be balanced and of equal interest for both parties,” officials said, focusing on “avoiding a subsidy race.” The draft statement also looked to ensure export controls of chips technology are designed in ways that avoid a negative “impact on each other’s industries” — an apparent rebuke by EU officials of Washington’s attempts to ban the sale of high-tech Dutch microchip printing technology to China.
The language in the draft EU-U.S. statement contrasts starkly with draft language from the U.S., Japan, India and Australia for a “Quad” meeting this week, according to a report in Nikkei Asia Saturday. The Quad draft oozed the levels of ambition that EU-U.S. negotiators could only dream of in their preparations.
In trade, negotiations have been faring better, and EU officials were more optimistic about concrete outcomes, for example on investment screening and export controls. Both Brussels and Washington were eager for quick wins to avoid the TTC facing the same fate as prior similar initiatives, such as the Transatlantic Economic Council.
A lot of the work that has been done threatens to be lost if Europe pulls out of the process, or undermines it by delaying the first meeting.
“If they postponed it, the momentum is gone. The U.S. will lose interest and say: ‘We’ve seen this before, it was called TTIP,'” said Tyson Barker, head of technology and global affairs at the German Council on Foreign Relations and a former U.S. State Department official.
Beyond the outcomes, the mood music of the first meeting is equally important to reviving the transatlantic relationship. After the Afghanistan debacle, the submarine deal has been another reminder for EU leaders of the American disdain that they remember from their dealings with previous U.S. presidents.
“It may not be right to think it is just about what happened last week,” Breton told reporters in Washington, mentioning the EU travel ban, past U.S. export restrictions on COVID vaccines, and the Afghanistan pullout as factors that also displeased EU leaders.
“The diplomatic tensions between France and the United States over the Australian submarine deal have added an extra layer of mistrust to the transatlantic discussion,” said Noah Barkin, managing editor at research firm Rhodium Group’s China practice.
“The Europeans are asking themselves whether the Biden administration is interested in meeting them halfway, or going its own way. And the Americans are growing impatient with the slow pace of European engagement on their top foreign policy priority — China,” he added.
Or, as Bernd Lange, chairman of the European Parliament’s trade committee, told reporters on Monday: “The honeymoon is over.”
Sarah Anne Aarup, Gavin Bade, Laura Kayali and Leonie Kijewski contributed reporting.
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