They can find common ground by agreeing on rules for the 21st century economy. rather than allying against China.
Observing last week’s tussle between US and French over the Aukus security deal, which was threatened to derail this week’s inaugural US-EU Trade and Technology Council meeting in Pittsburg, I was reminded of a famous line from the film cool Hand Luke: “What we’ve got here is failure to communicate.”
Following the French push to scupper the crucial meeting, Thierry Breton, the European commissioner for internal markets, warned that something fundamental was “broken” in the transatlantic relations. That may be true when it comes to the US, France and submarines. But I wonder if many of the broader trade and technology disagreements between the US and the EU don’t come down to a matter of language.
While the US tends to point specifically to China when discussing the need for a new transatlantic trade and technology framework, Europeans are allergic to the idea of being stuck in between the two giants. Who could blame them? China and the countries aligned more closely with it than with the US now account for around half of the world’s population. The EU itself now does more trade with China than with the US.
And yet, if Europe wants to live up to its own liberal values, find an alternative of surveillance capitalism (be it on the part of Big Tech or the Big state), and ensure an ever playing field in the 21st Century economy, it has little choice but to work with the US on things such as artificial intelligence regulations, supply chain security, rules around investment and export controls, and everything else that the TTC is meant to cover. China is going to its own way. The EU can follow, or not.
But European and American Policymakers don’t explicitly have to call out china to find common ground. They need merely to focus on a different word: competition. All of the major issues on the table can be just as easily couched in terms of creating fairer markets as they can be positioned as a Strategic alliance against China.
Take the issue of supply chain resiliency, and in particular the security of semiconductor supply, which is an issue of huge concern for both the US and the EU (each of which have legislation in train to fund more domestic production of Chips). Even if Chinese annexation of Taiwan wasn’t a real possibility in the next few years, does anybody really think having 92 percent of the world’s most advanced semiconductor manufacturing capacity in one of its most geopolitically contested places was a good idea?
Making sure that a single country (or more accurately, a single company: TSCM) doesn’t have a choke hold on the nuts and bolts of the digital economy is just good sense. A bit of regionalization in foundry capacity would be smart for the US and EU, but also for the world at large. The White House supply chain review in June did a pretty good job at laying out the issues of concentration in the semiconductor industry and how the US and European and Asian allies that own crucial parts of the supply chain could work together to bolster supply. The road map is already there; this is low hanging fruit for policy agreement.
Protecting digital labour markets could be another easy win. The pandemic made it clear that far more white-collar work could be done remotely, and thus potentially outsourced, than we’d imagined. Software that turns foreign accents into American English in real time is attracting buyers in places such as India and the Philippines. It seems only a matter of time before the outsourcing of call center work turns into the outsourcing of higher pay jobs, like remote teaching or tele-health.
Imagine the political implications of large-scale disruption of middle-class service work in the US and Europe by Countries that have lower pay and lanours standards. The digitalization and outsourcing of more back office work (think insurance claims and medical from processing) also brings up questions about who gets own the value generated by these tasks? Big Americans insurance firms? European state healthcare systems? The Asian companies doing the processing?
These are live questions, and both the US and European have a major stake in making sure they do a better a Job of protecting labour rights and the rights of citizens (not just customers) in 21st Century digital trade frameworks than they did in the past few decades of neoliberal trade agreements.
Those agreements were predicted on the idea that allowing global capital to flow where it wanted would always lead to good outcomes. Bu the rise of both state-run capitalism and powerful technology platforms have created major market asymmetries. Not everyone plays by the same rule. Not all market players have the same information.
That’s why common rules on the export of sensitive Technologies and a shared framework for investment screening in both the US and EU are crucial. Issues such as IP theft, human rights in Xinjiang, or lack of adequate disclosures by foreign firms listed on the top western exchanges are about making sure that markets are both fair and efficient. Surely, that’s a goal we can all agree on.