In a few days, US President Joe Biden will visit Europe for the first time. The opportunities for a new era of transatlantic cooperation are immense, but the window of opportunity to seize them is small.
It is a rare thing for the European Union (EU) to experience pleasant surprises in international politics. It is all the more delightful that this has been the case for its relations with the US since President Joe Biden took office. The difficult issues of trade policy play a particularly important role here. This is partially the case because the challenge posed by China is perceived more strongly on both sides of the Atlantic. There will be no return to TTIP. Moreover, the urgently needed new Transatlantic trade agenda can only succeed if both sides work through old disputes on Airbus/Boeing as well as on steel and aluminum tariffs and focus on future-oriented areas of cooperation.
Firstly, the US and the EU must reposition the World Trade Organization (WTO) at the center of the multilateral trade order. An indispensable first step was President Biden’s decision to drop US opposition to the appointment of a new WTO Director-General. We now generally need a triad of dispute resolution, reform, and reorientation.
In 2018, former EU Commission President Jean-Claude Juncker and former US President Donald Trump established a transatlantic WTO working group. In recent years, the US, the EU, and Japan have held rather constructive trilateral talks on new ways to combat subsidies that are illegal under WTO law, especially by China. The top priority must now be talks on reviving the WTO’s independent, two-tier dispute settlement body. To this end, the EU must reiterate earlier proposals to overhaul and modernize the WTO rulebook. The EU Commission’s proposals are promising because they address American criticisms of the WTO and are mindful of the changed global economy. They also address digital trade in goods and services, forced technology transfers, and unfair state subsidies.
It is in both parties’ mutual interest to strengthen cooperation with like-minded partners at the international trade level, for instance, by inviting other countries besides Japan to build a strong front against unfair trade practices. The EU Director General for Trade suggested an EU-US-led initiative at the WTO to develop rules for competitive neutrality, which should be pursued further.
A second area of cooperation is an urgently needed sustainability agenda of trade relations. The Glasgow Climate Summit in November 2021 will provide an initial benchmark for ambitious CO2 reduction targets and climate finance. The key question is whether the Biden administration will respond to the EU’s initiative and, for instance, join a Carbon Border Adjustment Mechanism for industry. At the same time, it is important to reward climate-friendly production of industrial goods at the WTO level by lowering tariffs, and to align WTO rules with the Paris climate goals, eliminating any conflicts between them. Another point of departure is the OECD dialogue on ending state support for fossil fuels, which has made little progress so far. A Green technology alliance, as suggested by the US, would also help create Transatlantic product standards. There is a wealth of opportunities for federal states and regions to cooperate on climate policy across the Atlantic.
In addition to the crucial climate issues, there must be a third area of cooperation to address technological transformation. US Treasury Secretary Janet Yellen’s proposal for a global minimum tax on corporations opens up important opportunities. The Biden administration is more open than the Trump administration to a digital corporation tax at the OECD level. The EU needs to take advantage of this and continue the talks. The EU has proposed a Trade and Technology Council that would address the systemic rivalry with China, allow exchange on technological issues, and provide an institutional framework for their resolution. One prerequisite for such a tech dialogue is to involve the parliaments on both sides of the Atlantic. In trade policy, the US and the EU need to coordinate their strategies regarding China. A bilateral dialogue on China, which was recently revived by the EU High Representative for Foreign Affairs and Security Policy, Josep Borrell and US Secretary of State Antony Blinken, offers a platform to do this. Finally, political offers to support partner countries’ development around the world need to be coordinated at the Transatlantic level.
There is not much time for the Transatlantic partners to press ahead with this ambitious agenda. The EU is under pressure to find a good way out of the pandemic. In two years, the US will elect a new US Congress. Depending on the outcome of these midterm elections, the balance of power could shift to President Biden’s disadvantage. Both sides therefore need to score successes, which will be harder to do if they work against each other. The EU Parliament and national parliaments can play an active role in this process, in exchange with the House of Representatives and the US Senate.
This article originally appeared in German on June 4th, 2021.