Once upon a time, the fate of U.S.-EU trade depended on questions such as whether or not American cheese could be labelled with European names like “Gorgonzola” and whether or not Europeans should buy U.S. chicken that had been washed in chlorine.
This shift in perspective, which may make it harder to resolve trade disputes, is existential in nature.
The world’s supply networks have had to be rethought in response to the first epidemic in recent memory. The fight against climate change has recently received massive funding. Economic and political structures are vulnerable to disruption from emerging technologies like artificial intelligence and next-generation 6G communication networks.
Underlying it all is rising concern about Chinese competition and a shift in emphasis in the EU and US towards supporting indigenous sectors rather than promoting global imports.
This year, the United States’ long-time senior trade negotiator with Europe, Daniel Mullaney, retired. “This is a different world: Climate, non-market economy policies and practises, supply chain vulnerabilities are top of mind,” he said.
Meetings between U.S. and EU officials in Sweden this week highlighted the drastic shift, which means that climate and tech issues will become more entwined with trade, making cooperation more problematic as each side competes with an outmoded regulation.
Mullaney stated, “The evolution over the last 10 years was driven by a lot of different factors, and we’re not going back.” There’s no need for a collective sigh of relief because the previous administration has been removed. Even before the last administration, things were beginning to alter, notably in Europe.
In an effort to close the gap, the Biden administration launched a new forum. The U.S.-EU Trade and Technology Council, which recently convened in Sweden, is looking beyond the two regions in an effort to expand trade between the United States and the European Union, whose 27 member nations negotiate trade as a unified bloc. That means having more conversations about how the two groups can work together on the rules and regulations governing the technologies and industries that will be crucial to the expansion of the economy in the future.
On Wednesday, a group of government officials in Lule, a small industrial city above the Arctic Circle that is a centre for “green” steelmaking in Europe and home to the data servers of U.S. internet giant Meta, concluded their fourth TTC meeting.
A decade and a half ago, the two sides took very different approaches. U.S. and EU commercial interests were at the forefront of the Transatlantic Trade and Investment Partnership, a conventional free trade negotiation initiated by former President Barack Obama. These discussions finally stalled as European leaders faced increasing political pressure from a grassroots movement fearful of deeper economic cooperation with the United States.
When the United States imposed higher tariffs on steel and aluminium imports under former president Donald Trump, China retaliated by increasing its own taxes on American goods. American export icons like bourbon and Harley Davidson motorcycles were hit with retaliatory tariffs from the European Union. Trump has also threatened to impose heavy tariffs on European automotive imports. The two parties settled on a modest tariff reduction plan.
There is no longer political will to confront old trade frictions following the breakdown of free trade talks and the tariff frenzy of the Trump administration. Some examples of persistent problems in international trade include the European Union’s ban on GMOs and the United States’ “Buy American” policy, which prevents many European companies from competing for government contracts.
“On many of these irritants, we just found a way to live with them,” said Hosuk Lee-Makiyama, head of the European Centre for International Political Economy in Brussels.
The Biden administration has adopted a “worker-centered” trade policy, as opposed to returning to the typical give-and-take of tariff talks. Raising international labour and environmental standards is prioritised to level the playing field for U.S. employees rather than pressuring trade partners to adopt digital policies more friendly to U.S. tech corporations or open their markets to more U.S. investment. This is occurring without the incentive of increased access to the wealthy American consumer market due to concerns about political ramifications.
At the same time, the World Trade Organisation has lost its authority just as it was supposed to become the focal point for defining new global norms for commerce in a new era. Many people feel that the European Union and the United States, two of the organization’s most prominent members, are to blame for its decline in importance. The cumbersome, consensus-based organisation has been stymied for the better part of this century by the need to confront new concerns in the global economy, such as sustainability and China’s behaviour.
Hugo Paemen, a former EU ambassador to the U.S., remarked, “The world was very happy when China came to the WTO because most people thought China was going to change, but it is China that changed the WTO up to a certain point.”
New climate policies have exacerbated trade conflicts between the two countries, but neither has an effective global or bilateral trade forum to adjudicate issues. The European Union was infuriated because its automakers were excluded from a significant U.S. tax incentive for electric vehicles. Vehicles, batteries, and minerals manufactured abroad, unless by a free-trade partner, are specifically excluded from the law. The European Union, which does not have a free trade agreement with the United States, is currently in talks to negotiate an agreement that would allow European companies to reap at least some of the benefits of the tax credit if the vehicle in question includes so-called essential minerals harvested or processed in the EU that may be used to build batteries.
Secretary of State Antony Blinken, who was in Sweden last week for the most recent TTC meeting, brought up the fact that a few hundred kilometres away is Europe’s greatest deposit of rare earth metals.
The future of Sweden’s mining industry is bright, he continued, and it is becoming increasingly crucial to the green transition.
Similar concerns have been voiced by American businesses about the European Union’s Carbon Border Adjustment Mechanism. In order to level the playing field, the legislation authorises the bloc to levy a fee on imports of items from nations without comparable carbon pricing seen in European countries.
Many people doubt that the TTC will actually do anything to solve these problems or prevent future conflicts.
You have to use what you have at the moment, and that is TTC, to make a meal. They’re making the best of a bad situation. Former European Trade Commissioner and current senior fellow at the Peterson Institute for International Economics Cecilia Malmström commented, “[But] it’s not a lot.”
In the future, transatlantic leaders will need to figure out how to adapt the old trade model to the world’s new difficulties and the public’s revised view of globalisation.
Despite this, “we’re still going to have boxing matches,” Lee-Makiyama assured. We can agree to quit kicking each other in the groyne, though, so that’s something.