US, EU meet to forge trade and tech alliance to reduce dependence on China

·7-min read

Late on Wednesday in a former steel factory in Pittsburgh, Pennsylvania, the European Union and United States unveiled an alliance to sharpen their modern arsenals for tackling China on trade and technology.

The agreement, however, was reached only after some last-minute haggling and a diplomatic stand-off involving France and the US.

The United States-European Union Trade and Technology Council (TTC), first announced in June, aims to reduce its members’ shared reliance on China’s manufacturing juggernaut while strengthening their respective domestic supply chains involving strategic technologies.

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While China is not mentioned in the 17-page joint statement – EU officials insist the council is not aimed at any single country – it is a clear focus of the new grouping.

US Trade Representative Katherine Tai (left), Commerce Secretary Gina Raimondo and Secretary of State Antony Blinken speak with European Union commissioners Margrethe Vestager and Valdis Dombrovskis at the inaugural US-EU Trade and Technology Council in Pittsburgh. Photo: AFP
US Trade Representative Katherine Tai (left), Commerce Secretary Gina Raimondo and Secretary of State Antony Blinken speak with European Union commissioners Margrethe Vestager and Valdis Dombrovskis at the inaugural US-EU Trade and Technology Council in Pittsburgh. Photo: AFP

References to “shared democratic values”, “non-market economies that are undermining the world trading system” and “misuse” of artificial intelligence technologies that threaten “fundamental freedoms” aimed at Beijing and other authoritarian regimes fill the document.

Co-chairing the two-day meeting are US Secretary of State Antony Blinken, Commerce Secretary Gina Raimondo and US Trade Representative Katherine Tai, and European Commission Executive Vice-Presidents Margrethe Vestager and Valdis Dombrovskis.

“We had a very productive day,” Blinken said.

Despite teething pains and divided interests separating the transatlantic partners, the TTC represents a promising platform to counter China’s rising and often disruptive global footprint through alliances, a cornerstone of US President Joe Biden’s policy, officials and analysts said.

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“This is a real new moment,” said a senior EU official. “There are a lot of difficult issues and we have a forum.”

Anja Manuel, director of the Aspen Strategy Group and Security Forum, agreed. “It’s a really important initiative,” she said. “Overall, this is a big net positive.”

The inaugural meeting comes amid tensions between Beijing and many Western nations over trade, technology, military ambitions and human rights. But it is also marked by diplomatic seams among Western allies, with the TTC’s launch almost torpedoed by a row over French submarines.

“It’s not like we walk hand in hand like a married couple of 25 years,” said one EU official. “But it’s a relationship.”

Shocked by the announcement of an American-Australian-British Pacific defence pact known as Aukus, which ended a US$65 billion French deal with Canberra in favour of at least eight new US nuclear submarines, Paris threatened to cancel the Pittsburgh event. It also dragged its heels on semiconductor cooperation and raised timing concerns over the TTC’s next meeting, Politico reported.

An earlier draft of the statement seen by the Post made reference to achieving concrete outcomes “by the time of our next meeting in the spring of 2022”. The final version omitted the spring 2022 scheduling reference.

European officials played down any major differences, adding that the next meeting would likely be in Europe in the first quarter.

The statement is long on plans but short on tangible projects, with a section on “Pittsburgh outcomes” infused with such aspirational phrasing as “we believe”, “we recognise” and “we intend”.

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The document outlines a collaborative approach focused loosely on investment screening, export controls, artificial intelligence, semiconductors, and resolving global trade challenges.

It also calls for the formation of 10 working groups in specific areas, including tech standards, clean technology, resilient supply chains and such sensitive technologies as 5G and advanced 6G networks, undersea cables, data centres and cloud infrastructure.

Another working group is charged with addressing the “misuse of technology threatening security and human rights”, including unlawful online surveillance, foreign misinformation and “address social scoring systems”, apparently a reference to China’s controversial social credit system.

US Trade Representative Katherine Tai and Valdis Dombrovskis, trade commissioner for the European Union, speak to reporters in Washington on Tuesday. Photo: Bloomberg
US Trade Representative Katherine Tai and Valdis Dombrovskis, trade commissioner for the European Union, speak to reporters in Washington on Tuesday. Photo: Bloomberg

Senior European officials who spoke on background said the TTC did not mention China by name in part because the EU already has other discussions with the US specifically focused on China, technology and trade.

They added that mentioning China might also ‘confuse” issues. “The logic is not to be against somebody but to be for something and to try to push that agenda,” one official said.

Analysts added that omitting specific references to China also serves other purposes: it attempts to address irritants, including state-directed capitalism and intellectual property theft, that are not unique to Beijing, however effectively it wields them. And it reduces somewhat the risk of a Chinese backlash amid Beijing’s growing willingness to cut off trade and punish perceived adversaries.

“Countries realise that China is important to them in many ways,” said Nicole Bivens Collinson, managing principal at Sandler, Travis & Rosenberg and a former top negotiator in the Office of the US Trade Representative.

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“China may be the biggest users of certain policies, but neither the US nor the EU want to make China the enemy. They need to be engaged.”

Top European officials and analysts said the TTC would have to deliver practical outcomes and navigate numerous shoals if it hopes to make a difference geopolitically or economically and become more than a “talking shop”.

“We are far from a transatlantic honeymoon,” said Reinhard Bütikofer, head of the European Parliament‘s China delegation.

The transatlantic challenges include easing tensions over US punitive steel and aluminium tariffs imposed by former president Donald Trump and addressing long-standing non-tariff barriers, such as health and safety standards, imposed by both sides that effectively exclude foreign competitors.

EU officials said there was no discussion of metal tariffs or Trump, adding that the goal was to “move forward”.

Another major concern is managing the global semiconductor shortage that is seizing up supply chains, affecting everything from cars to computers. While both sides agree on the dire nature of the problem, national security concerns and parochial interests could undermine US-EU cooperation.

Semiconductors also underscore the limits of the new council’s reach, amid different outlooks in Washington and Brussels involving China and technology, analysts said.

EU officials said there was discussion of the need to cooperate to avoid a “subsidy race” that could fuel overcapacity and undercut the industry.

On a related front, the main manufacturers of semiconductor manufacturing equipment – a technology Washington is keen to keep out of China’s hands so the West can maintain its lead – are the United States, the Netherlands and South Korea. “So US-EU cooperation is not going to do it alone,” said Manuel.

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“And there are two conflicting issues here,” she added. “If you talk to many Americans, they’ll say TTC is a way to get Europe on our side in countering China. And if you talk to Europeans, they’ll say this is a way to get Americans on side to regulate big tech. Hopefully if they work hard, they can do a bit of both.”

Officials say the Biden administration chose the venue for TTC’s launch – a former steel factory recast as a technology centre – for its obvious transformative symbolism, to underscore the theme of new-economy jobs. Pennsylvania is also a key swing state that went narrowly for Biden in 2020.

In a follow-up meeting with chief executives of local companies, Biden, Raimondo, Tai, Vestager and Dombrovskis emphasised the importance of creating high-paying jobs and matching hi-tech opportunities with the right skills.

“If anyone doubted that we have anything in common, this is it,” said Vestager, echoing Raimondo’s concerns that some 500,000 US cyber technician jobs are going unfilled. “We need to do the same thing.”

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