Giulio Kowalski

The EU-US trade partnership is the largest bilateral trade and investment relationship between the largest economies in the world (the EU economy accounts for 25.1% of global GDP and the US one represents 21.6%). Although bilateral, the EU-US trade partnership heavily impacts the global economy given that the EU or the US (or both) are the most important business partners for most countries worldwide. Furthermore, although the role of China as the EU’s import source for goods has greatly expanded in the last years, the US remains the EU’s largest trade and investment partner.

After the tensions characterizing the “Trump era” (e.g., US tariffs imposed on EU steel and aluminium recently suspended for a two-year period), the EU-US partnership on trade seems to be experiencing its “Renaissance”. The new Biden administration may provide a chance for a renovated transatlantic partnership, centred on cooperation over global challenges such as climate change and the concerns originating from the digitalisation of the economy. With regard to the latter issue, the EU-US Trade and Technology Council (EU-US TTC), established in June 2021 following an EU-US Summit, proves the improvement in the EU-US relation. In particular, one of the Council’s main goals is to strengthen the EU-US global cooperation on technology, digital issues and supply chains. The summit served to reiterate the EU-US commitment over the reform of the WTO’s negotiating function and dispute settlement system. Nonetheless, as will be extensively illustrated in the following, tensions do not seem to have been dispelled completely (e.g., the suspension of aluminium and steel tariffs is only temporary).

In light of the above, two important, interrelated questions arise: what is the state of the art of the relationship between the two most powerful and influential economies and democracies? How are the EU and the US tackling issues affecting their trade relationship?

In the following, the blog aims to consider the central matters concerning the EU-US relationship (e.g., digital trade and regulation, human rights, China’s trade practices, the EU-US TTC) as discussed by five distinguished panellists on November 8th 2021 during the City Law School conference “Contemporary Issues in EU-US Relations” chaired by Professor Elaine Fahey, Jean Monnet Chair in Law & Transatlantic Relations at City Law School.

The first speaker, Andreas Aktoudianakis, EU Lead Digital Policy Analyst at the European Policy Centre, focused on the longed-for EU digital sovereignty (i.e., EU strategic autonomy in the tech industry and the latter’s regulation). In particular, he centred his contribution on how this unilateral policy objective fits into the renewed EU-US bilateral relationship and what is the role of the EU-US TTC in boosting cooperation in the tech sphere.

First, Aktoudianakis noted how the EU-US TTC constitutes a crucial framework of cooperation and a fresh start after five years of Trump presidency where the EU-US relations had met a new low. He pointed out how the EU stride towards digital sovereignty is the by-product ‒ not only of the alleged deficit of the EU tech sector but also ‒ of tense EU-US (trade) relationships due to the US interventionist and protectionist approach towards economic affairs.

However, the panellist noted, today the discussion on the deficit state of the EU tech sector and the EU strategic autonomy in the digital sphere need to be rethought within the reinvigorated EU-US cooperative framework. Aktoudianakis showed concern about ongoing EU regulatory proposals which could limit the potential for EU-US cooperation and coordination in the tech industry. For example, if properly planned, some of the EU’s digital policies such as the Digital Services Act (DSA), Digital Markets Act (DMA), and Artificial Intelligence Act (AIA), could condition joint approaches between the EU and US. Joint EU-US efforts could certainly bring more added value to the global governance of internet and data. Nevertheless, Aktoudianakis stressed how some tension is felt in the EU concerning the EU-US TTC since the EU’s engagement in the latter could potentially hamper the EU’s own plans of boosting autonomy in strategic sectors, and its plans for stronger enforcement action in the digital sector.

Nonetheless, Aktoudianakis made clear that the renewed EU-US partnership ‒ and particularly the EU-US TTC ‒ is an unprecedented chance for collaboration in a field (i.e., the tech industry) where it could be extremely challenging to have an impact on a unilateral basis, especially considering the advances that China has made in such area. Aktoudianakis concluded by expressing his hope for convergence happening in the EU-US trade relationship and particularly for regulatory initiatives in the tech sector.

The second speaker was Doug Cassel, counsel for the global law firm King & Spalding, whose presentation centred on possible tensions between the EU and the US in the area at the intersection between business and human rights. Expressing only his personal views, he compared approaches and initiatives relating to the intersection between business and human rights in the US with those in the EU.

In particular, Cassel focused his presentation on four specific facts that exemplify the EU-US relationship in the area at the crossroads of business and human rights. The first one related to the collapse of the Rana Plaza garment factory in Bangladesh in 2013. An important reason for the creation of two alliances ‒ instead of one ‒ tasked with the implementation of rules preventing such disasters was the US companies’ reluctance to accept binding arbitration in the case of disputes that might arise from such a new set of rules, whereas the European companies agreed to it. Secondly, Cassel referred to mandatory human rights due diligence for multinationals. The panellist noted how the EU is leading this desirable change by drafting a directive on such issue (i.e., the Draft Directive on Corporate Due Diligence and Corporate Accountability) whereas this is not happening in the US. A third fact concerned the United Nations draft treaty on business and human rights, which has been boycotted by the US since the beginning of the related negotiations (until the most recent session). Conversely, the EU has participated in every session together with the UK. The fourth and final point made by Cassel concerned the investor-state dispute settlement system. While the EU and Canada have proposed a standing international court to settle disputes between foreign investors and host states, the US opposes ‒ or at least do not support ‒ this idea.

The third panellist to take the floor was Sylvia Chen, an independent policy advisor for international businesses on diverse trade policy issues. Chen zeroed in on how the solution of the EU-US trade tensions could lead to better addressing China’s unfair trade practices.

First, Chen remarked how, after the Trump era (characterised by a “weaponisation” of the trade policy), the EU-US partnership seems now to have stepped up a gear. The Biden administration appears to be actively engaging with the EU to resolve the trade tensions afflicting their trade relationship. The agreements suspending for five years tariffs imposed in connection with the Airbus/Boeing WTO controversy and that providing for the two-year disapplication of the US tariffs to quotas of EU exports of steel and aluminium constitute two important examples of attempt cooperation.

Second, and more importantly, Chen explained how easing the tensions between the EU and the US could allow the parties to deal more effectively with a greater ‒ shared ‒ issue: China’s unfair trade practices. This is particularly true if one considers that, for instance, the EU-US agreement suspending the aluminium and steel tariffs aims ‒ among other goals ‒ at addressing global overcapacity from China.

Chen acknowledged some problems concerning the solutions found to the EU-US trade tensions. First, the temporary nature of certain tariff suspensions (two years for the aluminium and steel tariffs and five years for that related to the Airbus/Boeing WTO case). Second, the difficulties in finding a coherent EU policy towards China ‒ with some “hawkish” Member States confronting more “dovish” ones ‒ that makes it difficult, in turn, to align with the US and other allies on the matter. However, Chen concluded by calling for both sides of the Atlantic to use this favourable moment in the EU-US relationship to reshape transatlantic trade and produce concrete results within the next couple of years.

Anna Fielder ‒ Senior Policy Advisor to the Transatlantic Consumer Dialogue (TACD) ‒ was the next speaker who illustrated how the TACD ensures that consumer and civil society interests are incorporated in the negotiations relating to the EU-US trade relationship. Fielder identified four consumer and human rights-related issues concerning the EU-US current cooperation dialogue and illustrated TACD’s recommendations (two of process and two of substance) to tackle such issues and foster the transatlantic dialogue.

Firstly, Fielder welcomed the voluntary cooperation (with emphasis on voluntary) and focused on transparency. She called for the EU-US cooperation to guarantee meaningful involvement of civil society   in the EU-US negotiations, from a consumer and human rights perspective. Secondly, she identified a potential consistency problem. Where there are different dialogues (such as the EU-US TTC working group on data governance and platforms, and the Joint Technology Competition Policy Dialogue) dealing with analogous matters (e.g., cooperation in competition policy and enforcement in the tech sector) the risk of divergent answers to similar concerns is significant.

Finally, Fielder raised two points of substance. First, Fielder expressed hope for collaboration to tackle the harms caused by the “surveillance economy”. Referring to the issue of “dark patterns” (i.e., user interfaces aimed at manipulating behaviours of internet users into taking actions that do not correspond to their preferences or expectations), Fielder pointed to the US FTC recent rulemaking to tackle this common practiced. She wished that such policies could trigger an exchange of information and best practices between authorities and regulators worldwide and function as a base for improved cooperation over harmful digital business models based on data exploitation. Second, Fielder raised the issues of unsafe and illegal products sold online – a massive problem (e.g., two thirds of products sold failed EU safety laws in consumer organisations research in 2020). There’s need for solutions to this problem, a good example on how data can be exchanged, with common safety alerts, common research, etc. She also raised the issue of the security of Internet of Things (IoT) devices, where similar cooperation is needed, and depicted the controversial case of Cayla the doll, a connected and easily hackable toy that raised both privacy and important child safety issues. Notwithstanding consumer associations’ campaigns against such device, only a few countries withdrew this doll from the market. Clearly, Fielder concluded, there is scope for more (particularly EU-US) cooperation and unified actions against serious potential harms due to illegal products sold on the global markets.

The final speaker presenting his views was Rupert Schlegelmilch, Acting Deputy Director-General of DG Trade at the European Commission. The tensions in the EU-US trade relationship were the first focus of Schlegelmilch’s intervention.

It is true, he firstly noted, that the EU-US TTC hints at the de-escalation of some trade issues. However, a number of issues still exist in the trade relationship which are not solved or only temporary solved. The panellist referred in particular to the two-year disapplication of US tariffs on quotas of EU exports of steel and aluminium under Section 232 of the Trade Expansion Act of 1962. Even worse, Schlegelmilch noted, new investigations under Section 232 are being launched by the US. According to Schlegelmilch, this would conceal that, notwithstanding the change in the US presidency, several US trade actions are still guided by a national interest that could potentially be detrimental for US allies such as the EU. On top of this, Schlegelmilch observed, the US seems not to be very cooperative on the WTO reform, contrary to the European multilateral DNA.

In this potential framework of tensions, what is the role of the EU-US TTC? Schlegelmilch suggested that such an initiative may certainly be a serious attempt to look for common grounds on issues stemming from the tech/digital sector. Such issues already permeate the trade agenda (the EU-US TTC and the EU-US Joint Technology Competition Policy Dialogue are two illustrative examples of this trend) and are likely to shape the global trade and governance issues for the years to come. Schlegelmilch acknowledged the importance of unilateral intervention to tackle trade ‒ and particularly “digital” trade ‒ issues (e.g., the proposed DSA and DMA regulations in Europe). However, he pointed out the importance of making unilateral tools compatible, not contradictory, by cooperatively developing them. The EU-US TTC offers precisely this opportunity, by serving as a relevant platform to coordinate intervention among institutions and stakeholders (such as the TACD) and address global (digital) trade. In other words, Schlegelmilch summarised, the main objective of the EU-US TTC should be to provide better coordination, avoid harmful politics, frictions and grant more effectiveness in addressing digital markets issues. However, a serious challenge is to find the value-added in these discussions and avoid vague and unclear speculations on a series of crucial topics for global (digital) trade.

In conclusion, what seems to emerge from the discussion above is that the “Renaissance” of the EU-US relationship is actually taking place. It manifests itself through key initiatives such as the EU-US TTC or the ease of retaliatory tariffs policies. However, internal (e.g., unilateral uncoordinated regulatory intervention on digital global issues) and external (e.g., China’s unfair trade practices) issues also surface which might put such renovated cooperation at risk. Thus, with a view of efficiently tackling global challenges such as climate change and the issues stemming from specific aspects of the digital economy, it seems imperative that the EU and the US not only celebrates their renovated relationship but also commit to overcoming the latter’s weaknesses.

Watch the recording of the event here  

For more information about research related to the transatlantic relations and EU Law, visit the Institute for the Study of European Law, and Jean Monnet Chair in Law and Transatlantic Relations.

 

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