Comment

Pushing back on Beijing in the EU-U.S. Trade and Technology Council

Carisa Nietsche / May 2022

U.S.-EU Trade and Technology Council Ministerial family photo in Pittsburgh, Pennsylvania, on September 29, 2021.Photo: Wikimedia Commons

 

When the United States and Europe stood up the Trade and Technology Council (TTC), European Commission officials stressed, “the TTC is not a dialogue on China.” The United States and Europe have long diverged in their approaches to Beijing. However, the Ukraine crisis might be changing that. The gradual shift taking place in Europe might create space for a new agenda in the Trade and Technology Council to address risks emanating from China.

Europe’s stated policy is to approach Beijing as a partner, competitor, and systemic rival. In the past few years, Europe’s approach to Beijing has shifted more toward systemic rivalry. The crisis in Ukraine – and China’s response – could more dramatically shift EU policy on China. Up until this point, a few developments in the EU-China relationship have precipitated Europe’s incremental shift. For one, in March 2021, the European Union imposed measures on four Chinese party and regional representatives in response to Beijing’s human rights abuses. Beijing retaliated by imposing measures on European Union officials, Members of the European Parliament, and European analysts. A year later, Lithuania opened a Taiwan representative office in November 2021. China responded to this move by blocking Lithuania’s imports to China a few months later. Most recently, the April 1 EU-China Summit was coined the “dialogue of the deaf” by Josep Borrell, the EU’s foreign policy chief. Given China’s response to the ongoing crisis in Ukraine, Beijing received a frosty reception. For the first time since the dialogue was launched, the EU and China produced separate readouts from the summit, rather than a joint statement. All of these events have contributed to Europe’s shift toward systemic rivalry with China.

Incremental shifts in China policy are occurring not only in European governments, but also in the business community. European industry has long held a cozy position on China, given its sheer market size and the opportunities for investment. However, the Ukraine crisis is illuminating the dangers of doing business with an authoritarian government. While the European business community is often the holdout on adopting a more confrontational China policy, a recent survey from the German Chamber suggests otherwise. In late March, a majority of German companies replied that the Ukraine crisis was affecting their China strategy. Furthermore, 33% of respondents indicated they plan to put business or investments on pause.

This shift in political rhetoric presents an opening in the policy conversation for the United States and Europe to more closely align their approach to China. The Trade and Technology Council (TTC) is one such venue to identify a transatlantic approach to China in the trade and technology domains. Following the invasion of Ukraine, the TTC coordinated on export controls directed against Russia. While the US-EU Dialogue on China is the primary venue for transatlantic coordination on China policy, the TTC has proven to be in a strong institutional position for quick coordination and is poised to take a leading role in coordinating transatlantic action on China in a few different domains.

For one, the TTC is currently coordinating on investment screenings and export controls. However, this is an area where the United States and Europe should further deepen their collaboration. Three EU member states currently have no investment  screening mechanisms in place, and six member states are still developing the mechanisms. The United States and EU should continue to share best practices on investment screening mechanisms. Furthermore, they should collaborate on outbound investment screening mechanisms. In July 2021, President Biden’s National Security Advisor Jake Sullivan signaled support for outbound investment review. Recently, the U.S. House of Representatives’ “America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength Act of 2022” (“America COMPETES”), included contentious text to create an inter-agency process to review outbound investment. The United States and Europe should begin exploratory discussions on these mechanisms now to assess whether Europe has the capacity or plans to impose a similar system. If both the United States and Europe implement outbound investment screening mechanisms, they could then coordinate on how to structure these mechanisms and begin sharing information so the transatlantic allies take a similar approach to these investment reviews.

Another area for cooperation is charting a joint approach to addressing China’s big tech companies. The European Union’s Digital Markets Act has taken heat for unduly targeting U.S. tech companies. The U.S. Department of Commerce and big technology firms argue that targeting U.S. firms ultimately advantages Chinese firms who are not held to the same standards. The TTC’s working group on data governance and technology platforms could be a venue for the United States and European Union to discuss a joint approach to tailoring antitrust initiatives to also target Chinese firms. Further, the transatlantic partners should also address China’s industrial subsidies to prevent large Chinese companies from leveraging government backing to increase their market power.  

Finally, the TTC should be advancing a protect and promote agenda for critical technologies. On the defensive side, the United States and EU should coordinate their risk assessments on critical technologies. Early coordination will prevent a redux of the transatlantic battle over whether to ban Huawei 5G kit from European networks. On the affirmative side, the TTC should create sectoral action plans to coordinate how to handle specific technologies and industries. For instance, there has been little coordination between the EU Chips Act and the U.S. CHIPS Act. To prevent a subsidy race to the bottom, United States and Europe should align approaches to semiconductor subsidies in the TTC working group on secure supply chains. Likewise, the working group on ICTS security and competitiveness should begin aligning their approach to 6G to avoid repeating the pitfalls of the 5G rollout.

The United States and European Union should use momentum from the Ukraine crisis to pave the way for convergence on China policy. While the United States and EU might not replicate each other’s policy, increased coordination is important. The crisis in Ukraine might create an opening for the United States and Europe to more closely align their approach to Beijing, starting in the Trade and Technology Council.  

          

Carisa Nietsche

Carisa Nietsche

May 2022

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