During a recent trip to Brussels earlier this month, the CSIS’ Emily Benson spoke to Borderlex’s Rob Francis about the future of US trade policy, the transatlantic relationship, and her expectations for the next meeting of the EU-US Trade and Technology Council at the end of May in Sweden.
Q: Is there a trade strategy in Washington?
After US national security adviser Jake Sullivan’s speech earlier this month, we now have a concrete articulation of the Biden’s administration’s vision on trade.
Sullivan explained that the world is moving from a Parthenon-like post -World War II system, with clear columns and clear lines, towards a Frank Gehry-style of architecture that is very convoluted and twisted.
The latter is probably a more realistic representation of how the global economy works, especially if you are injecting geopolitical and economic security into this equation.
Sullivan explained that future cooperation may take the form of the many sectorial arrangements such as the proposed EU-US Global Arrangement on Sustainable Steel and Aluminium or a recent trilateral arrangement between the Netherlands, Japan, and the US on semiconductor exports to China.
This will not be very efficient economically: but the future will look more like that rather than inherently multilateral.
Q: What are your hopes for the TTC in Luleå at the end of this month?
One key deliverable from this TTC will be the establishment of a new task force on quantum technologies.
This will be good first step in creating bilateral engagement over a technology that lots of decision-makers haven’t yet wrapped their heads around.
Based on an initial draft of the joint statement, it looks like the parties will be focusing more on emerging technologies.
This is what the TTC is meant to do in the first place – to look ahead, not at old traditional trade frictions.
Green technologies and green commodities will definitely come up. It is less clear whether the global arrangement for sustainable steel and aluminium will feature.
Interestingly, the location of the TTC – Luleå, Sweden – is the only place in world that can produce 100% green steel.
This looks like an astute way for the Europeans to show that they are aiming for higher standards on green steel than the Americans.
Q: Are you optimistic a deal can be reached on green steel by October, and if so, what do you expect to be in it?
There is a need to accelerate talks and make sure they succeed. But I’m not sure it will happen. After all, it is extremely difficult to agree on what constitutes ‘green’ steel and aluminium.
This is an extraordinarily ambitious trade framework, and we need to get it right. Creating an artificial deadline may not be helpful if the parties are trying to remake the rules of the road through this agreement.
In October there will probably be a statement which will grant an extension to the current circumstances and allow the negotiations to continue.
But there remains a complete transatlantic misalignment on priorities. Whereas the Europeans see the arrangement as a creative workaround to end the Trump tariffs and accelerate the decarbonisation of hard-to-abate sectors, for the US it’s primarily a mechanism to install a new tariff regime on commodities from China.
Q: How do you view the critical raw materials agreement currently being negotiated between Brussels and Washington? Is it easier to finalise now that the agreement with Japan has been concluded?
There is not much to the agreement with Tokyo. It is just an affirmation of principles about fair, free and equitable mining, as well as supply chain integrity.
That doesn’t look like a traditional trade agreement, and therefore probably doesn’t satisfy the requirements of the IRA – but it does avoid the deal going to Congress.
If it included market tariff liberalisations and market access concessions, that would more clearly constitute an FTA and would need to be submitted to Congress.
This administration didn’t seek to renew Trade Promotion Authority – which would have allowed it to conclude trade agreements on its own. As a result, they must now submit any FTA to Congress – and Congress will likely reject it.
There will almost certainly be litigation over the Japan deal in the US, since it very clearly doesn’t constitute a trade agreement. And the same is true for the planned agreement with the EU.
The discussions with the EU are a bit trickier from a political perspective. The Europeans care more about the IRA than Japan and have been much more vocal in pushing back against it.
Q: How does Washington view the WTO now? Is it a secondary consideration?
There is a group of people in Washington who believe the WTO doesn’t serve a purpose. At the moment all the talk is of economic security, geostrategy, export controls, and outbound investment screening, but the WTO is not the right institution for that.
There is a strong belief among younger policymakers in Washington that the WTO won’t exist in a decade and that traditional trade agreements are a thing of the past.
This is embodied in the US’ struggle to adapt to a multipolar world.
Such a prospect makes Washington uncomfortable, but its inability to see how profoundly the world is shifting towards a multipolar system is in some ways restraining the US’ ability to design the right policies for today.
