The fault lines hindering plans for a strong U.S.-EU alliance on tech and trade

It’s a meeting of allies eager to show a united front as a bulwark against China.

U.S. and European Union officials gather in Pittsburgh on Wednesday for the first meeting of the EU-U.S. Trade and Tech Council, a trans-Atlantic effort aimed at tackling joint challenges to maintain the West’s influence in technology and trade.

But diplomatic skirmishes and industrial fault lines between the trading partners threaten to undermine those efforts before the group has made its formal debut.

These differences could compromise the council’s broader goal of determining how the world handles challenges posed by emerging technologies like artificial intelligence. And they do not augur well for President Joe Biden’s attempts to smooth over international alliances after trade wars and tensions set in motion by former President Donald Trump.

Officials from both sides of the Atlantic frame the meeting as a much-needed chance to reset their rocky relationship and tackle technological problems.

“Future conflicts will be fought very differently,” Valdis Dombrovskis, EU’s trade commissioner, said during a speech in Washington before the meeting. “The fight over tech will be the new battleground of geopolitics.”

Those charged with rebuilding the frayed relationship this week include Secretary of State Antony Blinken, Commerce Secretary Gina Raimondo and Trade Representative Katherine Tai on the U.S. side. In addition to Dombrovskis, the European Commission is sending Margrethe Vestager, its competition chief.

The leaders plan to emerge from the inaugural gathering with five areas to focus on, including how to regulate artificial intelligence, tackle export controls and conduct so-called investment screening. Though it is just the first of many expected meetings, it will set the tone for how they cooperate, particularly against the rise of China as a technological superpower.

“The U.S. and EU have aligned interests in ensuring the next generation of technology is based on democratic principles,” said Tyson Barker, head of the technology and global affairs program at the German Council on Foreign Relations, and a former State department official. “The potential is there, but it’s already been bogged down by the tyranny of headlines,” he added.

Practically, the council will need to overcome several other challenges. Here are four key issues that lie ahead:

Will France be a willing partner?

An unrelated flare-up this month between Washington and Paris nearly derailed the council’s start. A new security pact between Australia, the U.K. and the U.S. surprised EU officials and resulted in a Paris-backed company losing out on a multibillion-dollar submarine contract. France lobbied the EU to delay the Pittsburgh meeting and had help from the Germans, who asked Washington to postpone the event during bilateral talks last week.

Though the council is moving forward on schedule, U.S. relations with the French are not back to normal. France successfully pushed to water down the commitments on semiconductors to merely focus on the short-term global shortage of microchips. More in-depth discussions on linking U.S. and EU chipmaking will happen at the next transatlantic gathering planned in spring 2022, most likely somewhere in France, according to two U.S. and EU officials who spoke on the condition of anonymity.

Biden and French President Emmanuel Macron are scheduled to meet in Europe next month to continue smoothing over tensions. But some European leaders feel trust between the longtime allies has been broken, especially after Biden promised a hard reset following the contentious Trump era and Europe’s dissatisfaction with how the withdrawal from Afghanistan was handled.

European officials with hopes of rekindling greater ties with the U.S., though, have downplayed the standoff or sought to move past the issue.

“Especially in times of difficulties, it’s important that we keep our communication channels open; that we discuss how we overcome those difficulties,” Dombrovskis told reporters on Tuesday. “We, in a sense, should not allow those disagreements to cloud our outlook.”

What happens with data privacy?

Privacy and data ownership are at the core of several issues the Trade and Technology Council hopes to tackle. Those include plans to align the U.S. and EU approaches to regulating artificial intelligence and how governments regulate data. Other topics for discussion include how to stop authoritarian governments from gaining access to sensitive technologies and early-stage talks about combating online disinformation, according to draft versions of the meeting’s final communiqué obtained by POLITICO.

Washington and Brussels have been locked in parallel data talks trying to hammer out a successor to the so-called Privacy Shield, an agreement that allowed companies to move people’s personal information from the EU to the U.S. Europe’s highest court invalidated the current deal in July 2020.

It’s the second time the Court of Justice of the European Union has ruled that a transatlantic data deal does not sufficiently protect EU citizens’ information. The failed agreement raises questions about whether Europeans’ privacy rights can be upheld in the U.S., where surveillance laws give agencies wide scope to collect and use people’s information.

Dombrovskis insisted Monday the lack of a transatlantic privacy agreement won’t hamstring the council’s work. Officials on both sides have pledged to press ahead with those talks over the coming months, and a deal may be finalized by the end of the year.

The business sector is nevertheless ramping up the pressure on both sides to iron out a solution — even though the Privacy Shield deal will not be officially on Wednesday’s agenda.

“Data flows are the lifeblood of the modern economy, certainly the lifeblood of the trans-Atlantic economy,” said Marjorie Chorlins, senior vice president for European Affairs at the U.S. Chamber of Commerce. “If we can’t get that right, it’s hard to see how the TTC achieves really meaningful outcomes since so much of what is anticipated to be on the agenda of the TTC has a direct tie to data.”

What happens with China?

China has become a wedge issue between Brussels and Washington ever since Biden took office. That conflict, too, is playing out in the Trade and Tech Council.

The U.S. views the gathering as a prime opportunity to push back against China by forging common tech and trade standards, but the EU has taken pains to play down any sense that Beijing was a target.

EU countries, especially economic powerhouses France and Germany, are hesitant to push back too hard against China because of their significant economic ties to the world’s second-largest economy. Internal wrangling within the 27-country bloc has left Europe divided on how strongly to push back against China’s rise.

“We don’t speak with one voice on that issue,” one EU official said. “We still need to come together on an internal position before we can discuss that in detail.”

The differences about how to approach China were discussed until the final days ahead of the meeting, according to multiple officials directly involved in the discussions. For instance, there was disagreement over whether to include fisheries in the council’s final statement on combating forced labor, with several EU countries pushing back.

China has taken notice of the divisions. On Tuesday, Chinese Foreign Minister Wang Yi suggested Brussels and Beijing should hold their own high-level talks on trade and technology while praising the EU for not embracing the United States’ “new cold war” against China.

What happens with domestic politics?

The U.S. and the EU are still trying to bolster their respective semiconductor manufacturing with subsidies, while debating how to regulate A.I. and digital giants like Facebook. So far, Brussels has taken the lead on such digital rulemaking, but the U.S. Congress is starting to churn through the gears with its proposals.

The lack of clarity on what will happen to domestic rules could hamstring trans-Atlantic efforts to work together on areas like how to tackle online misinformation and what to do about tech’s online dominance.

Without agreements at home, U.S. and EU officials are not in a position to make commitments with each other internationally, and both sides still have differing views on the need for tech regulation. As part of Wednesday’s communiqué, Washington and Brussels will make it clear that the trans-Atlantic talks do not supersede whatever regulation may be passed domestically.

EU officials, for instance, were pleased that language about the need to reduce the harms from artificial intelligence was included in the official statement written for this week’s meeting. But neither Washington nor Brussels has settled on a domestic rulebook for the emerging technology, and it’s unclear to what extent lawmakers will be guided by the council’s discussions.

Barbara Moens contributed to this report.

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