Setting the tone: The value of the EU-US Trade and Technology Council

On 5 December, the leadership of the European Commission and US cabinet officials met in Washington, DC for the third ministerial summit of the EU-US Trade and Technology Council (TTC). The TTC initiative, launched in September last year, aims to facilitate continuous transatlantic cooperation on key technology and trade issues. Recently, however, disagreements between the European Union and the United States have overshadowed that cooperation – and threatened to disrupt the summit.

The “Buy American” provisions in the US Inflation Reduction Act (IRA) have frustrated EU leaders, who fear that massive subsidies for American industry will result in companies fleeing Europe. The Biden administration, meanwhile, is dissatisfied with the EU’s hesitance to leverage the TTC more aggressively against China. These disputes, an apparent lack of concrete new outcomes, and the exclusion from TTC negotiations of some of the biggest transatlantic tech and trade issues – such as the IRA or the legal conundrum of transatlantic data flows – have led many observers to conclude that the TTC’s days are numbered.

But, just as the TTC summit in May involved some exaggeration of the initiative’s success stories, the doomsday judgments on the current state of play are also misled. These dire prognoses largely stem from unrealistic expectations, as well as an incomplete understanding of the TTC’s scope and the functioning of the EU – which are closely linked.

Understanding the TTC

The European Commission and the Biden administration established the TTC as a non-binding instrument. In doing so, they took lessons from the failed Transatlantic Trade and Investment Partnership initiative and the damage the Trump era caused to relations between the EU and the US. The TTC’s non-binding setup puts the European Commission in the driving seat, with limited roles for member states and the European Parliament. This simplifies negotiations and facilitates an agile approach to addressing common evolving challenges. However, it also means that the scope and applicability of TTC decisions are inherently limited.

At the inaugural TTC summit, the EU and the US made the modest commitment to “coordinate approaches to key global technology, economic and trade issues … and to base policies on shared democratic values”. Crucially, both sides emphasised that TTC cooperation would not interfere with the regulatory autonomy of the EU and the US. So, grand expectations that the TTC would permit swift regulatory alignment, for example in the governance of digital platforms, were naive at best.

Similarly, the desire in the US to mould the TTC into a geopolitical vehicle aimed at China is mostly incompatible with EU reality. Ursula von der Leyen’s “geopolitical Commission” may, at least partially, share the United States’ ambitions and have a somewhat solidified position on China. But that is not the case for the 27 member states and for the union as a whole. European foreign and security policy continues to be shaped predominantly in EU capitals – not in Brussels – and is often insufficiently aligned between member states.

The issue of export controls in the TTC context illustrates this. At the Paris summit, leaders – and accordingly the media – hailed the coordinated and unprecedented EU and US technology export controls against Russia and Belarus as one of the TTC’s greatest success stories. Certainly, TTC engagement between the European Commission and White House officials played a role in facilitating the swift coordination of those controls. But, in the end, it was member states that negotiated and decided upon the measures in the Foreign Affairs Council, outside the auspices of the TTC. Importantly, it was the imminent security threat of a war in the EU’s neighbourhood that forced member states to swiftly align.

This is fundamentally different from leveraging the TTC to get the EU on board the United States’ new approach to strategic technology export controls against China, through which it aims to limit the country’s military and technology development. Although the EU acknowledged the geostrategic significance of broader allied export controls at the TTC’s inaugural summit, the bloc’s reality means the power to implement such controls largely lies with member states, not the European Commission. And, crucially, threat perception and economic dependencies with regards to China differ between EU member states, as well as between the EU and the US.

It should therefore be no surprise that the US has as yet failed to convince key member states to follow its export control approach against China. And it would be unreasonable to expect the TTC, a commission-led tech and trade initiative, to deliver concrete outcomes on this security policy issue. The TTC’s configuration and the realities of EU foreign policy mean the initiative simply cannot become the immediate geopolitical tool the US envisages.

The value of the TTC

Nevertheless, the TTC can make valuable contributions to nudging the geopolitical needle; it can facilitate coordination, foster mutual understanding, enshrine common policy principles, and aid in the development of compelling narratives – thereby setting the tone and baseline for further actions. But these small steps are difficult to sell as the grand milestones political leaders and the media like to see.

One such small step is this week’s announcement of two TTC initiatives for secure digital infrastructure projects in Jamaica and Kenya. The projects themselves will have limited impact and will hardly be headline grabbing. But they are a clear EU-US response to China’s assertive global infrastructure investments. This new transatlantic cooperation on connectivity investments in third countries, involving a variety of important stakeholders – including development and financing institutions – can have lasting and meaningful effects. Therefore, a proposed memorandum of understanding between the US Development Finance Corporation and the European Investment Bank to increase cooperation in connectivity financing, if followed through, will be of geopolitical significance.

Moreover, although the TTC cannot facilitate full regulatory alignment in technology policy between the EU and US, the initiative can help advance a common understanding on underlying principles – which can have far-reaching effects. The release of a joint roadmap towards common terminologies and metrics to assess the trustworthiness and risk of artificial intelligence (AI) is a case in point. An agreement on a common taxonomy and approach to risk management could pave the way for joint AI standards. This, in turn, would strengthen the positioning of the EU and the US in international standards bodies and help disseminate transatlantic standards across the globe. But, much like a memorandum of understanding on digital development cooperation, a shared repository of metrics to measure AI trustworthiness is unlikely to make the news.

TTC-facilitated convergence in these and other areas may fall short of full regulatory alignment, but it can advance common principles and reduce barriers to trade and research cooperation – with small steps working towards broader, long-term goals.

Room for improvement

This is not to say that the TTC has been an all-out success. Indeed, it is frustrating to see transatlantic friction result in the neglect of some areas in which more cooperation is urgently needed. For example, if the EU and the US do not find a way to collaborate more closely on 6G development, there is a real risk that China’s Huawei will dominate global markets. The issue featured prominently in previous summits, but it now appears to have been pushed down the TTC agenda. This is likely because the US administration, under pressure from US industry lobbyists, continues to pursue premature promises of Open RAN as a way of diversifying the market in favour of new American competitors. But this comes at the cost of cooperation with the EU in building Western 6G technology champions that can compete against Chinese giants.

Such disagreements, alongside the tensions over “Buy America” and the EU’s geopolitical immaturity, endanger continued TTC cooperation. Yet, the initiative has not exacerbated these issues; instead, it provides additional incentives to resolve them. It is vital for EU and US officials – despite misconceptions about and frustration with the TTC – to defend and push the initiative, which remains a valuable vehicle to achieve positive long-term impact.

It seems a reminder is necessary that the TTC is primarily a mechanism “to coordinate approaches to key global technology, economic and trade issues … and to base policies on shared democratic values”. The TTC will not resolve all transatlantic trade and tech issues. The EU will not become a US-like geostrategic force overnight. The US will not become an EU-like digital regulation frontrunner any time soon. And TTC summits will not always create big (positive) headlines. Once that is clear on both sides of the Atlantic, the TTC can continue to make valuable contributions towards a transatlantic market for emerging technologies and digital transformation based on common values.