Bringing Markets Closer TogetherThe Significance of the US-EU Trade and Technology Council
The Significance of the US-EU Trade and Technology Council
By Eduardo Castellet Nogués
The Biden administration has, in recent months, started repairing the Transatlantic relationship. This year, in the latest EU-US Summit in Brussels, American President Joe Biden pledged to “rally America’s allies to protect the rules-based order.” The stakes were at a high point commercially: in recent years, the US had slammed the EU with billions of dollars in tariffs and vice versa, the EU had been close to signing an investment deal with China (which ultimately failed), and Germany seemed fully on board to build the controversial Russian gas pipeline—Nord Stream II. President Biden, however, has brought a new tone to the table, and it seems as if multilateralism and consensus are the key to the US-EU relationship.
The most significant issue on the agenda for such a meeting was the Boeing vs Airbus dispute , a multibillion-dollar legal fight between the two largest aircraft manufacturers that has lasted close to two decades. The illegal subsidies given by the European Commission to Airbus allowed the US to install 7.5 billion USD worth of tariffs on EU products such as wine and cheese. Similarly, American subsidies to Boeing made the EU impose 4 billion USD worth of tariffs on their Atlantic allies, specifically on corn and technological products. On June 15th, however, the dispute came to an end, with both governments announcing the retracting of tariffs and the settlement of the dispute between the two large conglomerates.
Within that same press release, however, EU leaders made an important announcement missed by large sectors of the media-- the creation of the EU-US Trade and Technology Council (TTC). Co-chaired by the US Secretaries of State and Commerce, Trade Representative, and their respective counterparts in the European Union, the council is designed to create trade standards for the two Atlantic powers spanning across agriculture, chemical transports, digital transfers, banking, and much more. The Council’s intent is to bring the two markets closer together, and to tackle the differences that each region has in tackling specific products or issues. From the conversations in this body, the world has witnessed the invalidation of the Steel Tariffs, in which the Trump administration had mislabeled European steel as a “threat to US national security” and the resolution of the Airbus-Boeing case, already two enormous issues in the world of trade and international economics.
There are two pieces of wording to be noted, however, in the mandate of the Trade and Technology Council:
Promote innovation and leadership by EU and US firms: While seemingly vague and motivational, the spirit of this affirmation reveals a thinking in the EU to be highlighted. The EU wants to become a global investment leader, and they want to do so through the expansion and collaboration with the private sector. Previously, we have seen specific European countries—Spain and Italy—limiting their firms through astronomical taxes, but this could change soon. The French Presidency of the EU Council in 2022 and President Macron’s recent push for the private sector to develop new technologies in France could indicate a new approach to innovation and company policy. Quite significantly, the EU specifies that they do not wish to do so alone, but rather work with the United States, its largest investment partner to achieve international corporate leadership together.
Cooperate on key policies on technology, digital issues and supply chains: This is probably the most ambitious wording within the TTC’s mandate. It is widely known that privacy practices within American companies such as Facebook (Meta), Apple or Google have alarmed European governments in the past. The TTC has thus set a goal to breach those privacy differences and for the executives of the two largest markets in the globe to find common ground as to how to tackle it. There is potential for both the US to establish stronger consumer protection regulation as there is for the EU to revisit their strong rules, future months will tell how the situation develops.
There is, however, a larger issue mentioned indirectly in this wording: microchips. For months now, Americans have been hearing about the “Supply chain crisis” and how it is probable that many citizens will not be able to get their desired gifts this Christmas. While the labor shortage is highly notable in the US market, a larger issue has been developing globally without any attention from the media or politicians: a microchip shortage.
The COVID-19 pandemic, in one of its many extensions, slowed down the production of many factories in Taiwan, leading to a reduction of their exporting capabilities. It so happens that an astounding majority of the world’s microchips are produced by the Taiwan Semiconductor Manufacturing Co (TSMC), which currently holds 54% of the semiconductor market share, with the second largest company being a Chinese one. In fact, out of concern, the TTC has an entire working group focused on the issue of semiconductors, with the White House recognizing the issue as “A principle to update the rules of the 21st century economy.” Microchips, although seemingly only a piece of the puzzle, are necessary for phones and computers to work, but also cars, airplanes, factory machinery, boats and even military-grade vehicles. With a reduction of the microchips supply, global trade halts.
The EU and the US have already taken action, with the passage of the “European Chips Act” in October as a means to boost the EU's tech self-reliance. This move, executed in consultation with their American counterparts, will provide more self-reliance to both the US and EU markets, making them less dependable on the success of a single company.
The EU US Trade and Technology Council thus has the potential to change the rules for global trade, and to redefine the playing field of supply chains and international economic policy. The following months will tell how much of its goals and ambitions will be set into reality.
“Can the U.S.-EU Trade and Technology Council Succeed?” Council on Foreign Relations, Council on Foreign Relations, https://www.cfr.org/blog/can-us-eu-trade-and-technology -council-succeed.
“EU-US Relations: EU-US Trade and Technology Council.” EU Commission, European Commission, Mar. 2021, https://trade.ec.europa.eu/doclib/docs/2021/june/tradoc_159642.pdf.
“Fact Sheet: U.S.-EU Establish Common Principles to Update the Rules for the 21st Century Economy at Inaugural Trade and Technology Council Meeting.” The White House, The United States Government, 29 Sept. 2021, https://www.whitehouse.gov/briefing-room/statements -releases/2021/09/29/fact-sheet-u-s-eu-establish-common-principles-to-update-the-rules-for-the-21st-century-economy-at-inaugural-trade-and-technology-council-meeting/.
Liboreiro, Jorge. “VDL Pitches European Chips Act to Boost the EU's Tech Self-Reliance.” Euronews, 28 Sept. 2021, https://www.euronews.com/2021/09/16/von-der-leyen-pitches -european-chips-act-in-a-bid-to-boost-the-eu-s-tech-self-reliance.
YenNee_Lee. “2 Charts Show How Much the World Depends on Taiwan for Semiconductors.” CNBC, CNBC, 16 Mar. 2021, https://www.cnbc.com/2021/03/16/2-charts-show-how-much -the-world-depends-on-taiwan-for-semiconductors.html.