US and EU should talk about competition


Global Trade Updates

Looking at last week’s brawl between the United States and France over the Aukus security deal, which threatened to derail this week’s inaugural meeting of the US-EU Trade and Technology Council in Pittsburgh I remembered a famous line from the movie Luke’s cool hand: “What we have here is the inability to communicate”.

Following the French push to derail the crucial meeting, Thierry Breton, the European Commissioner for Internal Markets, warned that something fundamental was “broken” in transatlantic relations. This may be true of the United States, France, and the submarines. But I wonder if many of the broader trade and technology disagreements between the US and the EU aren’t all about language.

While the United States tends to refer specifically to China when discussing the need for a new transatlantic trade and technology framework, Europeans are allergic to being stuck between the two giants. Who could blame them? China and countries aligned more closely with it than with the United States now make up about half of the world’s population. The EU itself now trades more with China than with the United States.

And yet, if Europe wants to live up to its own liberal values, find an alternative to surveillance capitalism (whether from Big Tech or the Great State) and guarantee a level playing field in the world. economy of the 21st century, it has little choice but to work with the United States on topics such as artificial intelligence regulations, supply chain security, rules for investments and exports, and whatever the TTC is supposed to cover. China is following its own path. The EU may or may not follow.

But European and American policymakers don’t explicitly need to call on China to find common ground. They just have to focus on one other word: competition. All of the major issues on the table can be framed as well in terms of creating fairer markets as they can be positioned as a strategic alliance against China.

Take the issue of supply chain resilience, and in particular the security of semiconductor supply, which is a major concern for both the US and the EU (each with legislation in preparation to further finance domestic chip production). Even though China’s annexation of Taiwan wasn’t a real possibility in the next few years, does anyone really think that having 92% of the world’s most advanced semiconductor manufacturing capacity in the world? one of its most geopolitically contested places was a good idea?

Ensure that a single country (or more precisely, a single company: TSCM) doesn’t have a grip on the inner workings of the digital economy, it’s just common sense. A little regionalization of foundry capacity would be smart for the US and the EU, but also for the world as a whole. The White House supply chain review in June did a good enough job of exposing the issues of concentration in the semiconductor industry and how the American, European and Asian allies who own crucial parts of supply chain could work together to strengthen sourcing. The roadmap is already there; it is a fruit at hand for a political agreement.

Protecting digital labor markets could be another easy win. The pandemic has made it clear that much more white collar work can be done remotely, and therefore potentially outsourced, than we ever imagined. Software that transforms foreign accents into American English in real time is attracting buyers in countries like India and the Philippines. It only seems a matter of time before the outsourcing of call center work turns into the outsourcing of higher paying jobs like distance education or telehealth.

Imagine the political implications of a large-scale disruption of middle-class service work in the United States and Europe by countries with lower wages and labor standards. The digitization and outsourcing of more back office tasks (think insurance claims and medical form processing) also raises questions about who owns the value generated by these tasks? The big American insurance companies? European public health systems? Asian companies that do the processing?

These are live issues, and the United States and Europe have a major interest in ensuring that they better protect labor rights and the rights of citizens (not just consumers) in digital commerce frameworks. 21st century than decades of neoliberal trade agreements.

These agreements were based on the idea that allowing global capital to flow where it wanted would always lead to good results. But the rise of both state capitalism and powerful technological platforms have created significant asymmetries in the market. Not everyone plays by the same rules. Not all market players have the same information.

This is why common rules on the export of sensitive technologies and a common framework for screening investments in the US and the EU are essential. Problems such as intellectual property theft, human rights in Xinjiang or the lack of adequate disclosures by foreign companies listed on major Western stock exchanges aim to ensure that markets are both fair and efficient.

It is certainly a goal that we can all agree on.

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