Resolving the Transatlantic Partnership in Time

And that in turn depends on their ability to deal with the weight of the past, to navigate the fog of the present and to tackle the challenges of the future. Before it proves too late.

The Weight of the Past

Time often turns back on itself. When Joe Biden met European Commission President Ursula von der Leyen and European Council President Charles Michel for the first time as president in Brussels on June 15, the two sides knew they had to turn the page—on four tumultuous years of Donald Trump, but also on four years of Transatlantic Trade and Investment Partnership (TTIP) negotiations, which had stirred a hornet’s nest of European public discontent at the mistaken idea that this free-trade agreement would allow Washington to determine EU regulatory protections.

So they turned, almost unknowingly, to earlier models of collaboration, and particularly the one embodied in the Transatlantic Economic Council (TEC), created when Chancellor Angela Merkel came to Washington at the beginning of the German presidency of the EU in 2007. Critically, in agreeing to launch the new TTC, the Biden administration signed on to an idea the EU proposed in December 2020 as it welcomed the change in U.S. leadership.

As the wheel turns and Merkel is about to depart the stage, this reversion could be good idea, as the TTC ensures that five ministers (Secretary of State Antony Blinken, Secretary of Commerce Gina Raimondo, US Trade Representative Katherine Tai, and European Commission Executive Vice Presidents Valdis Dombrovskis and Margrethe Vestager) personally oversee collaboration in ten working groups, covering such priority issues as climate change, national security and trade, the digital economy, and global trade rules.

That said, the ministers hopefully will avoid the TEC’s fate and refuse to become enmeshed in petty disputes, such as the 2008 chlorinated chicken debacle that helped sink TTIP.

But, as much as they might wish, they cannot avoid the need to address the two disputes now roiling the transatlantic economic relationship: the Trump administration’s misguided decision to use national security as a pretext to place punitive tariffs on steel and aluminum imports, and the European Court of Justice’s misguided decision to throw out the EU-U.S. Privacy Shield arrangement. Neither issue is on the Trade and Technology Council agenda, yet failure to resolve them poisons work on others.

The Fog of the Present

The irony is that these issues and others are resolvable if the two sides can recapture the vision of the “barrier-free transatlantic marketplace” they once wanted to create to make U.S. and EU firms and workers more globally competitive. This vision stems from an understanding (now seemingly lost) that their economic relationship is based on investment, not trade. Indeed, the $4.5 trillion companies from the two sides have invested in in one another drives the $1 trillion in goods and services traded across the Atlantic each year, half of which is within the same firm.

Understanding this symbiotic relationship could help lead to a decision to reframe Trump’s “national security” tariffs on steel and aluminum into a “safeguard action” that phases out after five years (so in March 2023). It could also help resolve the long-standing Boeing-Airbus dispute for, while the two sides in June suspended the punitive tariffs they had levied on $11.5 billion in bilateral trade after the World Trade Organization ruled they had both illegally subsidized their large aircraft manufacturers, they did not resolve the underlying problems: European jealousy that Boeing benefits from huge U.S. defense and space programs, and U.S. concern that Airbus has not repaid its risk-free launch aids. This, even as both companies loudly advertise how deeply engaged they are in the other economy, and shudder at the even larger supports China gives its fledgling aircraft manufacturer.

A vision of an integrated transatlantic economy would allow the EU and the United States to grant each other full access to their defense procurement markets, while Airbus repays its loans over a generous period. And, knowing the transatlantic economy depends on transfers of personal data, the European Commission could adopt a risk-based approach to enforcing the European Court of Justice decision, pending an inevitable further ruling in which the court clarifies it did not really intend to prohibit all such transfers absent a change in U.S. national security law or to force those transfers to take place under a derogation (which would effectively vitiate the EU’s vaunted approach to data protection).

The Challenges of the Future

A vision of the integrated transatlantic economy the EU and the United States want to build is also essential as the Trade and Technology Council considers next steps, both between them and in their relationship with the rest of the world.

Bilaterally, the lesson of TTIP should not be to abandon ambition but to separate trade and regulatory issues. A Transatlantic Zero Agreement—the idea that arguably started the TTIP debate many years ago—still has merit, but findings of regulatory equivalence can only be done by the responsible regulators working with oversight from the European Parliament and the U.S. Congress, as has been the case in the EU-U.S. agreements on aviation safety, organic products, and pharmaceutical manufacturing. It was precisely this sort of cooperation that helped the U.S. Food and Drug Administration and the European Medicines Agency to quickly approve novel vaccines in response to the coronavirus pandemic.

Externally, the TTC should take a page from the TEC and rebuild strategy into the transatlantic relationship with an off-the-record principals-only discussion of how the EU and United States should address the China challenge.

Five of the TTC’s ten working groups point to the national security and trade nexus with China, most particularly those on export controls, investment screening, and supply-chain security (semi-conductors). This suggests an ambition to build serious cooperation in this sensitive nexus. The vision of how this would work could be quite simple—if either side sees the risk of a certain technology getting into the wrong hands in a way that would have national-security implications, it would tell the other, and both would act to prevent this through controlling the export of those technologies, or preventing their acquisition.

If that is a simple vision, the execution is anything but—not least because the EU has no competence over national security.

For collaboration to work here, the two sides will need to change their traditional approaches to one another. The United States must realize that it cannot just work with a few member states on this; it must also accept that the EU itself plays an essential role, because otherwise the technology can easily leak out through any member of the Single Market. It also needs to accept that it will need to share classified information with the EU and its member states. The first step in the TTC working groups should be to dust off, update, and use the information-sharing agreement concluded in 2007 to permit this.

On the EU side, the European Commission needs to accept that the member states must be actively engaged in the conversations. This would be in its interest as over time this will help expand its role in developing the EU’s autonomous list of controlled technologies. And the member states need to accept that not all of them can be at the table—they will need the rotating presidency troika and the Council secretariat to represent them.

If the EU and the United States can get beyond some of these bureaucratic hurdles, they can then get down to the real issues of understanding the national-security threats they face, identifying the key dual-use technologies and the specific countries and firms of national security concern.

Resolving in Time

Despite the tragedy of Afghanistan, the fracas over the French submarine contract with Australia, and the like, the EU and the United States are partners. They are deeply invested in one another and in the democratic values they share. They can build a robust transatlantic economy and globally competitive firms in a worker-centric economy.

But for all this to happen, the Biden administration and its European counterparts need to know this and to build a shared strategic vision that matches it. The first meeting of the Trade and Technology Council will be a success if it restarts this process. With global changes coming quickly, the two sides do not have much time.

Peter Chase joined GMF’s Brussels office in September 2010 as a non-resident fellow and became a resident senior fellow in May 2016. His work focuses on the transatlantic economy with particular attention to trade and investment, digital and energy policies, and the EU’s economic relations with third countries.

To read the full commentary from The German Marshall Fund, please click here.