The 4th EU-US Trade and Tech Council took place on May 30-31. Our experts look into the challenges and next steps.
The fanfare of last week’s EU-US ministerial summit may have impressed the citizens of Luleå, the idyllic town in the far north of Sweden. It certainly didn’t impress transatlantic businesses. Numerous organisations had pushed a clear message in the weeks ahead of the summit: we want greater EU-US economic cooperation to facilitate business. The areas are known: solving ongoing trade irritants, converging on rules and standards, cooperating on new technologies, and ensuring cross-border data flows (by finalising the EU-U.S. Data Privacy Framework). Very little of that happened. Yet, while not always eventful, the TTC is a must watch for any company with transatlantic operations (and beyond), particularly those working in tech and sustainability.
On trade, the TTC reflected again an underlyingdivergence. Washington views it as a way to involve Brussels in the economic and technological containment of China. Brussels complains of a lack of US engagement in “old school” trade topics, starting with solving the current disputes. However, the US recently argued at the World Trade Organization that US services and goods still face barriers when operating in the EU, in areas as cybersecurity, agriculture, and standards setting.
As a result, so far, the TTC has been more about technology than trade, and intense negotiations will have to continue on the thorny trade issues: tariffs on steel and aluminium and the Inflation Reduction Act. On the former, an October deadline is looming before the re-introduction of reciprocal duties (imposed by Trump in 2018 with the EU then reciprocating). On the IRA, the parties are still discussing a “mini-deal” on critical minerals to qualify EU manufactures for at least some of the US tax credits. At least, the EU and the US promised to coordinate to avoid (further) frictions on incentives for clean energy. Similarly, cooperation seems to be improving on semiconductors, with the goal of avoiding a subsidy race. Tangible trade results for businesses were limited, such as easier rules for trade in veterinary products and possibly on machinery. Convergence on conformity assessment is also expected.
On the tech side, AI was the hottest topic. The parties outlined terminology to identify common definitions of AI applications and the relative risks. The AI code of conduct will be another space to watch. At this stage, it will be a “non-binding AI Act” that companies will have the chance to subscribe to facilitate their operations. This aims to provide a level of certainty for companies until formal legislation comes into force. Potentially, it will be open to businesses at international level. But the realm of AI still holds numerous options. Internal Market Commissioner Thierry Breton proposed a non-binding set of rules for European businesses exclusively, the so-called AI Pact. However, a question remains: will this provide enough guarantees to companies? The Commissioner assured industry representatives that their voices will be heard, which is of particular importance given the forthcoming negotiations on the AI Act between the European Parliament and Member States. Finally on the tech side, it is clear to both the EU and US that 6G is the next critical global infrastructure. The goals are to set similar 6G standards and cooperate in research and development.
Looking ahead, on a positive note, progress is expected on the so called Transatlantic Initiative on Sustainable Trade – vital for companies involved in sustainability. Green public procurement will be an essential part, as the EU and the US try to increase environmental standards in their public tenders. Convergence is also expected on trade in the circular economy.
The times of old-school trade talks seem over. Forget TTIP-style debates on market access and investment protection. A new way of economic dialogue, more limited and focused on security, seems on the rise, as pushed by the US. For now, businesses will probably have to settle for that.