The EU-US relationship these days reminds me of unhappy celebrity couples on the red carpet – they smile for the camera and appear as if everything is OK, but we all know they are anything but content in private.
There were joyful photo moments and even some progress surrounding trade battles, such as the Airbus-Boeing truce, at the recent G7 conference. But, at the end of the day, Europeans are sceptical that the Biden administration is just a stopover on the road to another round of toxic populism. Meanwhile, Americans are annoyed that Europeans are hedging their bets between a stronger transatlantic alliance and a closer connection with China.
This does not need to be the case. It certainly can’t be. If the EU is serious about defending liberal ideals in an age of surveillance capitalism, it will require America’s help. And if the US actually wishes to divorce economically from China in crucial areas like semiconductors, green batteries, and electric vehicles, it will require demand from outside the country. There’s a lot of low-hanging fruit to be had here. It does, however, necessitate genuine empathy and understanding on both sides.
First, Europeans should not confuse America’s new industrial strategy, which was unveiled last week by Brian Deese, director of the president’s National Economic Council. It simply aligns the United States with what most other developed and developing countries do as part of routine economic planning: deliberate investments in high-growth technology and the use of government procurement power to promote local workers and firms.
Further than that, the plan intends to increase domestic and global economic resilience, in part by increasing geographic redundancy in fields like semiconductors, where 75 percent of capacity is concentrated in China and East Asia. Taiwan is home to nearly all of the world’s most advanced semiconductor manufacturing capacity, accounting for nearly 92%.
The EU’s “Digital Compass” initiative aims to increase the EU’s chip production share by 2030. The $52 billion bill introduced in the US Senate to enhance domestic semiconductor manufacture is a suitable complement to this.
However, rebuilding America’s chip manufacturing base would take a decade or more, and even then, the US will need partners to generate enough demand to make the economics of scale for an industry like semiconductors work.
Allies such as Japan and South Korea, as well as countries like the Netherlands, might all play a key part in reorganizing semiconductor supply networks. For global marketplaces, less concentration — both regionally and within single enterprises — would be beneficial. In an ideal world, the US, EU, and Asian allies would collaborate to develop common industry standards so that incremental innovation and demand in sectors such as semiconductors, green batteries, cleantech, and AI could spread across regions.
Another approach for the EU and the US to reach an agreement today is to “concentrate on common remedies to actual difficulties within their democracies,” rather than on China, where the Europeans do not want to take sides. Those obstacles might range from Big Tech regulation to common climate change goals, perhaps something as grandiose as placing a price on carbon. Despite objections from some European countries, such as Poland, the EU may release a draught proposal for a carbon adjustment system by July. The United States has the opportunity to counter with a proposal of its own.
Last week’s bipartisan infrastructure deal included little on sustainable energy, making this a difficult task for the administration. However, it is one that is consistent with the stated goal of putting climate change at the center of the country’s industrial policy. By proxy, it would also begin to address some common trade worries about China. If there was a true price on carbon, for example, Chinese steel dumping would be unthinkable.
The Biden administration may use any impending White House “Summit for Democracy” as a starting point for this endeavor. In areas like digital privacy, there is already a virtuous circle of ideas exchanging between the US and EU, with Europe’s General Data Protection Regulation (GDPR) spawning even more stringent Californian privacy regulations that could be enacted nationwide one day. Another area where both sides have informed each other’s efforts to limit platform monopolistic power is antitrust.
More cooperation on topics such as press freedom approaches to create a digital bill of rights, guidelines for regulating artificial intelligence and genomic research, and so on may be envisaged.
All of this would help to provide the groundwork for a new transatlantic partnership, one that focuses on repairing home flaws and building regional strengths rather than slamming China. Going it alone would be too risky for both parties.