How to improve transatlantic relations without caving to Europe on technology and trade

How to improve transatlantic relations without caving to Europe on technology and trade
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Washington and Brussels later this month will send senior delegations of economic and trade ministers to the first meeting of a new U.S.-EU Trade and Technology Council, dubbed the “TTC.” Their goal, as the name suggests, is to foster high-level cooperation on trade and technology issues of mutual interest. Given the long-simmering tensions between the two governments on matters such as digital taxation, cross-border data flows, antitrust, and more, such an effort is overdue.

Whether the United States and European Union succeed in using the TTC to rebuild the transatlantic relationship holds broad implications, because the alternative — strained engagement between major trading partners — would contribute to the global fragmentation of the digital economy. And worse, it would be a strategic gift to China, because it would represent a fatal dissolution of a key alliance needed to limit China’s technology mercantilism and counter its digital authoritarianism.

Forward-looking policymakers on both sides of the Atlantic need to recognize this and redouble their efforts to build a better, stronger, and deeper digital-trading relationship.

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But to do that, U.S. and EU negotiators will need to meet in the middle on some critical issues. The White House should not define success as increasing cooperation for its own sake — particularly if the price of comity is embracing the EU’s precautionary approach to regulating competition and technological innovation. The administration’s emissaries should instead focus on advancing key U.S. economic interests in ways that also maintain cordial relations with Europe.

For example, no matter how desperately the Biden administration’s trade negotiators may hope to restore harmonious transatlantic relations after watching in dismay as they deteriorated during the Trump administration, the United States cannot agree to a digital services tax or acquiesce to discriminatory regulation of internet platforms, as the European Commission seeks to do with its proposed Digital Markets Act. Either of those would skewer America’s leading technology companies (and kill U.S. jobs) and fundamentally alter longstanding regulatory principles at the expense of innovation and growth. By contrast, the administration and Congress could, and should, meet the EU somewhere in the middle on data protection — not by emulating its heavy-handed General Data Protection Regulation, but by passing a national privacy law that establishes a common set of protections across state lines while improving transparency and enforcement. That would hopefully persuade the EU to support robust cross-border data flows, while at the same time defending America’s pro-innovation regulatory system.

The most glaring differences between the United States and the European Union on digital economy issues stem from the fact that technology policy in the EU is motivated largely by social policy concerns — from data privacy rights to the potential for algorithmic bias — and it views the proper role of government as one of regulating and restraining digital companies and technologies to ensure they cause no harm. In contrast, the United States has long acted on the view that government is the one that should do no harm — and, where it can, it should support technological innovation. As such, the Biden team should ensure that talks cover how to foster the growth of technologies such as quantum computing and artificial intelligence. Besides, social concerns such as privacy, bias, and other related issues are best addressed at the national or regional level, not in bilateral or multilateral trade talks.

The risk is that the EU delegation will press the United States to adopt their precautionary approach to regulating data privacy, AI, and internet platforms, and that the Biden administration will accede, in part because many Democrats long to emulate European economic and social policy.

The EU could do this in part because it genuinely believes the world would be better off under its regulatory system, but also because it knows that unless major competitors adopt its stifling regulatory system, its own tech companies will remain at a competitive disadvantage.

Finally, while China won’t be in the room when U.S. and EU officials meet, it should be near the top of everyone’s minds. China’s innovation mercantilist policies — from forced technology transfers to massive production subsidies — have harmed both the U.S. and EU economies, and its digital authoritarianism is a threat to freedom.

It is in the mutual best interest of the United States and EU to push back.

But while the EU has sometimes offered supportive rhetoric, many European policymakers are wary of rocking the boat with China for fear of losing market access and risking diplomatic aggression in return. The U.S. delegation should press their EU colleagues to jointly commit to at least some concrete actions, such as shared Chinese investment screening.

Given the increasing threat China poses — and the countervailing benefits that would come from resolving digital policy disputes between the United States and the EU — the U.S.-EU Trade and Technology Council has significant potential. But the parties will need to start by agreeing on the principle that advancing digital innovation is in everyone’s best interest.

Robert D. Atkinson (@RobAtkinsonITIF) is president of the Information Technology and Innovation Foundation (ITIF), a leading think tank for science and technology policy.