Overcoming difficulties through discussion

The prospect for strengthening trans-Atlantic cooperation appears to be facing several challenges pertaining to different dimensions.

This was reflected recently during the talks held recently in Washington between the leaders of the US and the UK. President Biden has emphasized that the US will examine the different possibilities regarding trade opportunities with the UK within the post-Brexit scenario. UK prime minister Boris Johnson has underlined that he expects priority in this engagement. It may be mentioned here that the UK is keen to strike free trade deals around the world, including the US- with who the annual bilateral trade was worth an estimated US Dollar 273 billion in 2019. Against such a background the UK wants to take incremental measures.

However, both sides now realize that any movement forward will take time given the many other dimensions being faced between the US and Europe.

The EU-US has initiated steps since June, 2021 to usher in a renewed transatlantic partnership and set an ambitious future joint agenda for EU-US cooperation within the post-Covid-19 landscape. Media has reported that the Biden administration has offered the EU the opportunity to re-establish transatlantic relations, which reached their lowest point during the last days of the previous turbulent Trump administration.

Efforts are underway to address the bilateral disputes and tensions that have emerged, partly as a result of Trump’s ‘America First’ policies. After discussion it has been agreed by both Parties that there was need to establish the EU-US Trade and Technology Council (TTC). The TTC will apparently aim to deepen EU-US relations on trade and investment and also address the several technical barriers that exist presently pertaining to different issues. This will apparently be attempted by cooperating on key policies such as technology, digital policy issues and supply chains.

Analysts have however pointed out that despite the optimism in Brussels and Washington about renewing and strengthening transatlantic cooperation, there are several challenges for EU-US cooperation. In the areas of trade, digital and climate in particular several differing views or outstanding disputes (most of them inherited by the Trump administration) will need to be addressed by the new TTC (the first meeting is scheduled on 29-30 September 2021) or other joint bodies. Only then will the EU and the US be able to deliver positives on the new ambitious transatlantic agenda.

It may be recalled that the EU had already demonstrated its keenness to ‘reset’ transatlantic relations after Biden’s election victory in November 2020. The European Commission and the High Representative (HR) published on 2 December 2020 the Joint Communication on “A new EU-US agenda for global change” where it was stressed that while EU-US relations were tested under the Trump Administration through geopolitical power shifts, bilateral tensions, and unilateral tendencies, the new Biden administration would “present an opportunity to design a new transatlantic agenda for global cooperation based on our common values, interests and global influence”. This would help create stronger bilateral and multilateral cooperation to address the Covid-19 issues, climate crises; solve the EU-US bilateral trade disputes; improve cooperation on technology, trade, and tech standards; and work together “towards a safer, more prosperous and more democratic world”. The EU also decided to set up the TTC to address mounting competition from China as it sets its own standards in tech and digital trade. 

The TTC aims to deepen EU-US relations on trade and investment, and to avoid new technical barriers to trade by cooperating on key policies on technology, digital policy issues and supply chains. In this context the TTC is expected to cover numerous issues- technology standards, regulating Artificial Intelligence (AI), climate and green tech, ICT security, data governance and technology platforms, export controls, investment screening, digital technologies and challenges in global trade.

The EU is eager to reboot transatlantic trade relations and to end the trade disputes triggered by the previous Trump administration. However, at the same time the EU is considering a realistic and careful approach for transatlantic trade cooperation, focusing on specific issues of shared interest- solving the bilateral trade disputes and irritants; cooperation on WTO reform and strengthening regulatory and standards cooperation.

It is generally understood that the EU and the US will try to use trade to help fight climate change, protect the environment, promote workers’ rights, expand resilient and sustainable supply chains, continue to cooperate in emerging technologies and create decent jobs. In addition, both parties aim to uphold and reform the rules-based multilateral trading system and to stand together to protect businesses and workers from unfair trade practices, created by non-market economies that are undermining the world trading system. The last factor obviously refers to China.

It is clear that the EU and the US intend to not only share information regarding cyber security concerns and other areas relevant to non-market practices in the civil aircraft sector but also cooperate on the screening of inward and outward investment in this sector. However, strategists have noted that if the EU and the US cannot agree on what type of subsidies are allowed in this sector, it will be very difficult for them to challenge China’s subsidy programmes to its own civil aircraft industrial segment.

Despite the efforts from the European Commission to have the US suspend its Section 232 tariffs, nothing formal has been agreed to till now. Commission President von der Leyen  has however stated that Brussels and Washington needed “a little bit more of time” to settle the Section 232 dispute, but that she is confident that a solution would be reached before the end of the year. It is indeed crucial that an agreement be found before 1 December, when the postponed second tranche of EU rebalancing tariffs will kick in. Nevertheless, economists feel that it is unlikely that the Biden administration will swiftly terminate the Section 232 tariffs this year. Legal and political constraints limit the possibility to find a creative solution.

Another key priority for the transatlantic trade agenda will be cooperation on WTO reform. The Commission intends to pursue reform of the WTO across all of its functions- including the updating of its ‘rulebook’ and restoring its Dispute Settlement Mechanism (DSM) and Appellate Body (AB).

The Commission has already outlined several proposals regarding the WTO’s contribution towards sustainable development; restoring a fully functioning WTO dispute settlement system with a reformed Appellate Body; improving the functioning of the WTO system; and modernising its rules in areas such digital trade, agriculture and competitive neutrality. In the run-up to the 12th Ministerial Conference (MC12), which will take place from 30 November to 3 December 2021 in Geneva, the EU aims to intensify its engagement with the US on all aspects of WTO reform to seek a maximum of convergence on their respective positions, including possible joint proposals on issues such as ‘trade and health’ and ‘trade and climate’. The Commission appears to be particularly interested in three areas where work should intensify prior to MC12: trade and health, fisheries subsidies and the reform of the dispute settlement system.

Moreover, the Commission envisages addressing the concerns that the EU and the US share vis-à-vis China’s alleged trade-distortive practices, such as on subsidies and state owned enterprises (SOEs). Consequently, the Commission aims to intensify its engagement with the US, to launch negotiations on the development of rules on competitive neutrality, including modernized rules on industrial subsidies and SOEs. The Commission also believes that response to industrial subsidies can be taken further forward- through a trilateral format with Japan- by broadening its scope and membership with likeminded countries.

Economic strategists however feel that though the EU’s priorities for WTO reform are very much in line with those of the US; it is unlikely that the EU and the US will be able to reach an agreement on multilateral or plurilateral agreements before or during the MC12. Possible exceptions in this regard might be an agreement on fishery subsidies or Services Domestic Regulation.

The next sector that will be addressed seriously by both sides will be the three challenges pertaining to cooperation on digital policies.

The first factor that will receive attention will be the question of designing effective governance rules for digital services associated with online content on social media platforms and marketplaces. It may be recalled that the impact of disinformation was acutely felt in the EU during the European Parliament elections in 2019, as well as earlier during the Brexit referendum campaign in 2016. The European Commission has since drafted a Digital Services Act which aims to target these issues by creating a governance framework that improves transparency about the algorithmic activity and business models of digital platforms, e-commerce, and other digital services. The lack of common rules and minimum standards for transparency online has, according to the EU, undermined fair trade, consumer trust, and most crucially, democratic resilience online. The US has however, despite the January 6 events in the Capitol Hill been unable to draft anything similar to the European Commission’s Digital Services Act.

The EU-US is now both also trying to enhance their relationship regarding transatlantic climate cooperation. In April 2021, the US convened a “Leaders Summit on Climate”, bringing together leaders from across the globe to initiate climate action ahead of the UN Climate Change Conference in Glasgow (COP26). The US has also announced its target of climate neutrality by 2050, and a reduction in emissions by 50-52% by 2030. This aspect has also been reiterated by US Climate Envoy John Kerry. It is being hoped that both sides will be able to usher in a constructive engagement and common approach during multilateral negotiations -with the help of the two newly created platforms- ahead of COP26.

The writer, a former Ambassador, is an analyst specialised in foreign affairs, right to information and good governance. He can be reached at muhammadzamir0@gmail.com