Next steps for U.S.-EU relations

The tenure of President Trump's time in the White House brought about the lowest point in transatlantic relations since arguably a hundred years ago when the U.S. Congress wouldn't allow the United States to join the League of Nations. A tenure defined by irrational trade disputes and frequent public speculation of whether the United States should leave NATO is thankfully over - but what comes next? President Biden and his cabinet often say all the right things about restoring alliances and the shared values of the United States and Europe, but nice speeches are just that, speeches. We're 18 months into the Biden administration, and nothing close to President Obama's call in his 2013 State of the Union for a U.S.-EU free trade agreement (FTA) seems to be on the horizon. This is because the President doesn't currently have the authority from Congress to negotiate new trade agreements, and even if he did, new trade deals do not seem to be a priority for the current White House.

What we have seen emerge from Biden's foreign policy team is a pattern of them trying to do as much as they can without needing to seek Congress's input or attracting any negative attention from the press or voters opposed to trade liberalisation in the States. This leads to convoluted arrangements like today's U.S.-EU Trade and Technology Council (TTC) or the proposed Indo-Pacific Economic Framework (IPEF). TTC and IPEF seem to be the Biden administration's attempts to replace Trump pulling out of TTIP and TTP. TTIP was the proposed U.S.-EU FTA, and TPP would have been an FTA between Japan, Australia, the United States and eight other pacific rim nations. The now ratified U.S.-less version is known as CPTPP. While IPEF has received a mixed reaction, it comes across as the United States lecturing developing countries about labour and environmental concerns without offering increased trade or market access in return. However, the EU, in many ways, is ahead of the U.S. on labour and environmental standards. The nature of negotiations in the TTC framework do have promise to be productive without the roadblocks that IPEF faces.

Also, it should go without saying that the Russian invasion of Ukraine adds an increased need for Washington-Brussels cooperation. We have already seen this cooperation happen in real-time as there are reports that American and European export controls imposed on Russia make it very difficult for the Russian war machine to import the needed components to resupply itself.

So, TTC is a positive thing, but what's next? How significant can its impact be? Two things will dominate the news in the coming weeks and months. The first will be coordination on investment into domestic semiconductor production. Most people have likely seen countless news stories about supply chain and chips shortages in the past year. The EU Chips Act and the United States Innovation and Competition Act (USICA) are two pieces of legislation that will lead headlines in both capitals for the remainder of this year. Both bills aim to unleash massive investment to ensure this shortage never happens again. The EU's goal is to re-shore 12% of global chip production, allowing the EU to reach 20% global market share by 2030. USCIA could be as large as a $100 billion investment into American research and production. The U.S. Speaker of the House, Nancy Pelosi and Senate Majority Leader Chuck Schumer are negotiating the bill's final form.

It is up to the TTC to make sure these investments complement each other and don't lead to a subsidy race where we see governments trying to one-up each other to attract a new foundry and what every politician seeks - new jobs. This potentially cynical race to the bottom could lead to big checks handed out to semi-manufacturers. But it won't mean the United States and European Union have solved their problem of inadequate supply chains for their technology needs. After the last TTC meeting in May, the council expressed their wish to avoid subsidy races several times in the joint statement released to the public, but it was short on details. The only concrete plan is that both sides abide by World Trade Organisation (WTO) rules. The concern with that is the WTO has become a highly dysfunctional organisation; its dispute settlement mechanism is almost frozen. So, there will have to be a lot of trust and transparent communication between TTC principals to ensure the two Chips Acts complement each other and don't turn into a transatlantic competition to build new foundries the fastest.

The second issue will be the U.S.-EU agreement protecting European citizens' online data—the EU-U.S. European courts struck down the Privacy Shield pact in 2020, which was the transatlantic legal framework that regulated the transfer of EU citizens' data. Millions of European citizens use U.S. technology from Apple, Meta and Google daily. While most Americans have accepted how much tech giants and the NSA spy on us, this is still a topic of hot debate in Europe. If a new transatlantic data sharing agreement is not reached, Meta has threatened to shut down Facebook and Instagram in the EU. In March, European Commission President Ursula von der Leyen and President Biden agreed to a new deal to create an independent Data Protection Review Court for EU citizens to consult if they felt their data was being unlawfully collected. It would consist of individuals chosen from outside the U.S. government who would have full authority to adjudicate claims and direct remedial measures as needed. However, there remains a significant hitch. The changes that von der Leyen and Biden agreed to will not be done via an act of Congress but rather an Executive Order from President Biden. White House Counsel is currently working on the draft of this order, which will have to withstand a review process by the EU institutions. Yet even if this all goes according to plan, in 2025, a new President could think it's ridiculous that U.S. companies have to abide by European rules and rescind the Executive Order with a pen stroke. Thus, starting the process all over again.

All of this is to say that Brussels-Washington relations are in a healthy and productive place at the moment, only because the executives in charge want them to be. But unfortunately, few safeguards remain to prevent a return of the hostility between 2017 and 2020. Moreover, the political realities in the U.S. Senate prevent any adoption of formal treaties solidifying U.S.-EU relations for the foreseeable future. Ultimately the future of EU-U.S. relations will be up to voters on both sides of the Atlantic on whether Europhile and pro-American leaders remain in power.