Partners In Trade
The European Union and the United States share a unique economic relationship, and that partnership will come under the spotlight in the upcoming EU-US Trade and Technology Council Summit scheduled for 5th December. This article takes a look at some of the issues that are likely to influence those discussions…
Relationships
According to the US-EU Summit Statement, the United States and the European Union – combined - account for a population of 780 million people, and they share much when it comes to democratic values while theirs is the largest wider economic relationship in the world. Certainly, historically, Europe and America share a kinship: the 20th century saw the US’ sweeping assistance on two occasions from pan continental war. Currently, the consolidated EU bloc and the US are representative of 60% of the world’s GDP, 33% of the world’s trade in goods, and 42% of the world’s trade in services.
In fact, the growth of the EU’s financial weight has caused friction between the two entities at times, but both are inter-dependent and, as set forth by the European Commission, disputes have only affected 2% of their trade. More specifically, the Trade and Technology Council serves as a political and diplomatic platform through which the coordination of tech and trade policy is tested and agreed.
Figure 1 is taken from the European Parliamentary Research Service and illustrates the economic relationships between the US and the EU and their respective business partners (2021). Overall, 14.7% of the EU bloc’s exports go to the US and 16.7% of US exports go to the EU. The only comparative export quotas for the US are China at 14.3% (although this might be significantly revised owing to the growing enmity between the two countries that was instigated by Donald Trump), 15.3% to countries falling outside the chart and categorized as ‘other,’ Canada at 14.5%, and Mexico at 14.4%. For the US, it’s biggest export partner is indeed the EU.
For the EU, comparable export partners are China at 16.2%, and those countries designated together as ‘other’ at 22.7%. One might argue the EU is somewhat less dependent on the US market but the difference is negligible if there at all (other data that might now be revised would perhaps be the EU’s exports to Russia due to the Soviet invasion of Ukraine).
As set out by the European Commission in a press release
As set out by the European Commission in a press release on 15th June 2021, the EU-US Trade and Technology Council (TTC) was launched at the US-EU Summit on the same day. The idea behind the council is to meet periodically and at the political level to steer cooperation between the two entities and has the main ongoing goals to ‘expand and deepen bilateral trade and investment, avoid new technical barriers to trade, cooperate on key policies on technology and digital issues and supply chains, support collaborative research, cooperate on the development of compatible and international standards, facilitate cooperation on regulatory policy and enforcement, and promote innovation and leadership by EU and US firms’ to quote a mouthful. The TTC also includes a raft of working groups that will deliberate on the goals above.
Bloomberg managed to obtain a copy of a draft statement ahead of the talks due to be taking place in Washington next month. The draft – which will no doubt evolve as the talks get nearer – indicate discussions will centre around ‘non-market’ policies (with specific emphasis being laid on China).
The attendees will examine which directives will be able to combat the risks evident from such practices, focusing on areas such as the medical devices sector in China as well as selected government-controlled investment funds. Referring to China’s policies impacting particular markets by the EU bloc, will no doubt embolden the US who have been pushing the EU to take a more robust position on it for a while.
Leaders of European countries have remained reluctant to take such steps as they have wanted to avoid segmented marketplaces and isolating competing international arenas. One example of note has been France’s President Emmanuel Macron who was calling as recently as Friday for more engagement with Beijing. The statement further indicates a drive for solid market openings and partnerships in trade, but these areas remain under consideration.
Sustainable trading initiatives and practices across the Atlantic divide has also been referred to with the objective being to provide support to those initiatives that are oriented toward the transition to low-carbon economies. The draft also states how it seeks to address a less-than-potent early warning system to reduce the disruption to supply chains of semiconductors.
Other Issues
The EU has shown concern generally regarding the US’ clamp down on the export of chips, something the US may well be extending to other technologies, technologies that are seen as strategic in their nature. October saw President Joe Biden place restrictions on the selling of semiconductors and chip manufacturing equipment to China in a bid to stifle the county’s economic development. He also asked significant partners also to adhere to the policy which has served to increase fears further of a divided international marketplace.
Some further areas that are highlighted in the draft are: increasing the resilience of subsea cabling which is integral for modern tech, improving cooperation of controls of exports, enhancing collaboration on standards set for artificial intelligence, examining the possibility for the extension of all parties’ recognition and adherence initiatives to encompass things such as marine radio and machinery sectors, and, creating a task force to remove barriers to collaborative efforts on research and development around quantum sciences and technologies.
Cars
Perhaps one of the more tender areas is that of electric cars. So sensitive is the subject that officials who spoke to Politico magazine on the issue wished to remain anonymous. At the heart of the friction is the US’ heavy subsidies being given to people who buy electric vehicles manufactured locally. Whereas the US claims it is a measure designed to give the American economy a kick, the EU feels it equates to unfair market protectionism.
Such is the growing rancour over the subject that it is hampering attempts being made by President Biden and European Commission President Ursula von der Leyen to transition beyond the fallout of the Donald Trump era.
The very idea behind the summit is to contain market practices such as subsidies and creating market bubbles at regional and national borders, so it will be interesting to see if the issue is brought up at the summit at all next month.