by CLETE WILLEMS
President Biden’s decision to include Europe in his first presidential overseas trip in June raised hopes for a breakthrough in U.S.-European Union trade relations. The president consistently touts the importance of working with allies to address global challenges – including the threat to economic and national security posed by China – and the scheduling of a summit in Brussels that aims to “strengthen digital cooperation and trade ”suggests that a new era in US-EU relations may be upon us.
The commercial rapprochement between the United States and the EU is more important than ever. China’s attempts to restore international order under President Xi Jinping threaten long-standing transatlantic values on democracy, human rights and free speech – as well as our mutual promotion of free markets – through through institutions such as the World Trade Organization (WTO). And in recent years, the US and the EU have spent too much time and energy fighting, which is best spent coordinating action against China.
In recent years, the US and the EU have spent too much time and energy fighting, which is best spent coordinating action against China.
But American and European leaders should not underestimate the challenges of establishing a productive working relationship on trade. Disputes over aircraft subsidies and agricultural policy have persisted for years, American and European bureaucrats follow very different regulatory models, and the Biden administration’s fixation on Buy America angers Europeans almost as much as Europeans’ opinion. the von der Leyen Commission on Digital Sovereignty troubles Americans. In addition, it is important to remember that many past administrations had high hopes for cooperation between the United States and the EU on trade matters, including the ill-fated negotiations of the Transatlantic Trade and Investment Partnership (T -TIP) during the Obama administration, to see it. collapse once the details get in the way.
Leaders on both sides must learn from these mistakes of the past.
First, the US and the EU need to be realistic about what can be achieved. They should focus their immediate energy on solving specific and manageable trade irritants instead of seeking a more comprehensive free trade agreement. In particular, the two sides are expected to prioritize the outcome of the long-running dispute between Airbus and Boeing, US steel and aluminum tariffs and the corresponding EU retaliation, and taxes on digital services.
Second, both sides will need to be flexible in resolving these issues. On the steel issue, for example, the US should completely remove its tariffs on the EU despite the grumbling of the US steel industry. However, Europe must also commit to taking measures that will actually target China’s excess capacity, prevent transshipments into the EU market and prevent import surges into the United States. Likewise, when it comes to taxes on digital services, the EU should reciprocate the flexibility the United States has shown in the OECD negotiations on international taxation in recent months and agree to apply new tax rules to all businesses, not just US businesses.
Third, the Biden administration and the von der Leyen Commission must also exercise restraint on key priorities and recognize the impact poorly designed policies can have on their main ally. This means that the Biden administration’s new Buy American rules should not be designed to discriminate against European companies, but should only exclude companies from countries like China that do not open their government procurement markets to the United States. the EU’s digital sovereignty agenda, including the new digital marketing law, should not isolate US companies or incorporate technology transfer policies that resemble China’s. There are better and fairer ways to regulate big tech companies.
Both [the U.S. and EU] must be willing to take tough action against China to encourage it to follow international rules and standards and not back down in the face of an attempted coercion by China.
Fourth, an American-European program should accelerate work that establishes general standards for old and new technologies through multilateral bodies. This finally includes tabling a proposal at the WTO that would address Chinese industrial subsidies, state-owned enterprises (SOEs) and forced technology transfer, as well as finding ways to coordinate export controls through through the Wassenaar Arrangement and other similar configurations. The proposed trade and technology advice between the EU and the US could also be used for this purpose.
Fifth, the US and the EU must support each other when it comes to China. Both sides must be prepared to take tough action against China to encourage it to follow international rules and standards and not back down in the face of an attempted coercion by China. To give a recent example, Europe should be commended for its willingness to impose joint sanctions with the United States to tackle human rights violations in Xinjiang and it should be prepared to back down from the deal. Global on Investment (CAI) EU-China if China does so. do not drop its ill-advised retaliation against Members of the European Parliament and European businesses. Better market opportunities in the United States can help soften the shock.
Make no mistake, none of this will be easy. But the June summit in Brussels appears to offer the best opportunity in many years to finally put US-EU trade relations on a better track.
Clete Willems is a partner at Akin Gump Strauss Hauer & Feld, where he advises multinational companies, investors and trade associations on issues of international economic law and policy. Previously, he was Deputy Assistant to the President for International Economy and Deputy Director of the National Economic Council.