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Perspectives: How to make transatlantic trade policy cooperation work

The recently announced EU-US Trade and Technology Council is the latest of many attempts to encourage closer cooperation across the Pond. Previous initiatives have not delivered: if this one is to be different we need to learn the lessons from previous experiences, not least the need to involve political leaders in the detail.

President Joe Biden is clearly serious about building strong international relationships with old allies.

Last week’s visit to Brussels brought us one step closer to resolution of the long running Airbus-Boeing subsidies battle. This was accompanied by the announcement of the launch of a Trade and Technology Council. The announcement of this new structure was particularly encouraging for Europeans given that it was originally an EU idea put forward soon after the US election last year.

Such progress also demonstrates the extent to which a shared US-EU trade agenda is emerging. This centres around a belief that trade has not been delivering sufficient domestic economic benefits and that this must be changed particularly as we transition to a low-carbon economy. In particular, according to this discourse, supply chains must be returned from those who do not play fair in various ways, which is mostly China.

There are inherent problems in this vision. Increased EU and US protectionism in general is a poor basis for functioning relationships. Suggesting our subsidies are fine but those in China are unfair is a difficult basis to seek reform of the global rules-based trading system.

Yet if this narrative is questionable, one can agree that there is a need to rebuild public confidence in trade and that this does require changes. On this basis, renewed transatlantic dialogue is a positive development.

Perhaps the bigger challenge is that we have been here before.

Indeed, one could harshly categorise the EU-US trade relationship as 25 years of failure. None of the New Transatlantic Agenda (1995), the Transatlantic Economic Council (2007) or Transatlantic Trade and Investment Partnership (TTIP – 2013-2016) led to their desired results. But legal transatlantic disputes at the World Trade Organization – the first of which concerned hormone treated beef raised in 1996, have been rather more durable.

We must therefore ask what it is that needs to be different this time round.

Start with a realistic programme and make steady progress in delivery 

If we slightly revise and clarify the vision to the US and EU joining together to help shape a better functioning global trade system with shared rules and clear benefits, then the issue becomes what contribution the TTC will make to this.

There have been many discussions about why TTIP failed. While, clearly, public opposition was a factor, another important factor was surely the failure to make any progress in difficult ‘legacy’ issues such as agriculture trade – a long-standing US priority – or access to public procurement markets – a key EU concern.

By contrast, below-the-radar ‘regulatory coherence’ discussions made some limited progress: this lead to an agreement on mutual recognition of pharmaceutical inspections.

In outline, the new TTC seems largely focused on similar regulatory issues as in the TTIP era. Yet even here we know that there are already disagreements on issues included on the council’s agenda, such as cross-border data flows. There are also emerging political difficulties such as over carbon border adjustment mechanisms.

Failing to deal with such deep-seated disagreements will ultimately undermine the TTC discussions, while focusing on these too much will also prevent progress. It is therefore important to reach a shared understanding of how to deal with them. Whether that involves putting them on hold, finding shared high-level principles for their resolution, or some other solution matters less than the mere fact that something is being agreed.

Equally it is important to show quick, tangible progress where possible. There is a tendency in modern trade negotiations to promise this and then run into problems of detail. The agreement on mutual recognition of pharmaceutical inspections was discussed in TTIP talks and then outside them for around four years before there was any agreement, after which it took another 18 months for the accord to be fully implemented.

All of this points to the need for a detailed, publicly shared, programme for the new US-EU structures. Even agreeing on this would be a success for the renewed cooperation.

Be careful with stakeholders who want to divide EU and US

It is often assumed that business has most to gain from US-EU cooperation, and therefore will be most supportive. Certainly some business sectors are supportive of it. But there are also many commercial and other interests which want to win a regulatory battle. This is most obviously the case in agriculture. In tech it is often the case that consumer groups prefer the EU regulatory approach and businesses the US approach.

Part of the problem is that the stakes are just so high. Notwithstanding the rise of China: if the US and EU are to agree on regulatory approaches and international standards, then these stand a very good chance of becoming the global norms. In these circumstances it is worth stakeholders investing considerably to make sure their preferred approach wins out. In doing so, however, they reduce the chance of any single approach being adopted.

The previously mentioned complexity is also a factor, in that establishing global rules is difficult. Thus international trade increasingly takes place according to requirements laid down by those running global supply chains.

Perhaps in considering the programme of work, officials should consider how much really needs to be done, and what can be left to the market. For example while it is unlikely the US and EU can agree fully on rules around cross-border data flows, there may be broad principles which can be usefully established.

Involve a broad range of political leaders in the detail

Officials will be tasked with making the Technology and Trade Council work. As is traditional in trade policy, the leaders will set a mandate, review progress every so often, and hope to join a final negotiation before a deal is struck.

Such a traditional approach no longer seems appropriate given the challenges inherent in trade policy. This is even less so for what is the most important trade relationship in the world. Politicians have to be involved, not just in setting the principles but also in the detail, because that is where the difficulties lie. We can be certain that the stakeholders will be lobbying their elected representatives for either a US or EU approach: this is liable to entrench positions.

The meetings between Commissioners and US Cabinet members in the TTC are a start  – but will not be sufficient. Member state leaders also need to be involved, as do members of the European Parliament and the US Congress. They will have to find a broad common ground which goes beyond the mere aspirational and into the nuts and bolts of cooperation. It also means negotiators making space for this wide range of discussions – which is bound to be uncomfortable for them.

What we hope is that this time the aspirations for the EU-US relationship actually deliver.

It is great to be at another optimistic moment in the transatlantic relationship. But if that energy is not to quickly dissipate this time we need to do things differently.

 

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David Henig runs the column ‘Perspectives’ on the politics of global trade for Borderlex. He is also a UK director at the think tank ECIPE.

 

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