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Transatlantic Relations – Major Overhaul or Tiptoeing?

Semiconductor shortages, green technologies, security of information and communication technologies, export controls and investment screening are just some of the topics on which envoys from the European Commission and the Biden administration exchanged views in the framework of the new “EU-US Trade and Technology Council” (TTC) at the end of September. But what can be expected from this new transatlantic exchange? 

Transatlantic relations are of enormous importance for the German economy. In 2020, the United States was Germany’s top destination for merchandise exports with goods worth almost 104 billion euros being shipped to the United States. In terms of imports, the United States ranks third behind the People's Republic of China and the Netherlands. The two transatlantic partners are also closely linked in terms of investments: in 2020, German companies’ foreign direct investment in the United States amounted to 564 billion U.S. dollars (in third place after Japan and Canada), while U.S. companies had invested 162.4 billion U.S. dollars in Germany (FDI stock). Further deepening political and economic ties would help the post-pandemic economies on both sides of the Atlantic. 

EU-US Trade and Technology Council 

An attempt to revive transatlantic relations is the establishment of the new EU-US Trade and Technology Council (TTC). The TTC came together in Pittsburgh at the end of September 2021 for its first meeting. Under the leadership of U.S. Secretary of State Anthony Blinken, U.S. Secretary of Commerce Gina Raimondo, U.S. Trade Representative Katherine Tai and the two Executive Vice Presidents of the European Commission Margrethe Vestager and Valdis Dombrovskis, ten working groups were launched to discuss joint transatlantic approaches. 

The joint statement of the first TTC meeting contains initial announcements on common EU-U.S. projects in the areas of semiconductors, artificial intelligence, export controls, investment screening, dealing with non-market practices and reducing unnecessary barriers to trade in next generation technologies. The agreements mainly aim to share, evaluate and coordinate information on risks and practices on both sides of the Atlantic in export controls, investment screening and establishing a level playing field. In addressing the semiconductor shortage in industrial manufacturing, the United States and the EU want to identify short-term capacity gaps while avoiding getting into a subsidy race. Both sides also declared that they would promote the development of artificial intelligence in such a way that it is innovative, trustworthy and respects human rights and privacy. 

Further policy levers 

BDI considers the TTC to be a useful format for understanding different perspectives and institutional realities. At the same time, the concrete benefits for business and stakeholders remain unclear - the U.S. and EU negotiators should quickly clarify details so that the TTC can act as a problem solver. According to media reports, the next meeting of the TTC will take place in France in the first half of 2022. Until then, the ten TTC working groups will develop concepts for deepening transatlantic cooperation in the respective areas. 

From the perspective of German industry, it would be very important to also remove already existing bilateral transatlantic trade barriers. Tariffs and various rules on issuing conformity assessments unnecessarily slow down transatlantic trade in goods, especially for small and medium-sized enterprises. The TTC should therefore work to abolish industrial goods tariffs and mutually recognise conformity assessments in the transatlantic market. 

New regional initiative of German business - the Transatlantic Business Initiative 

German business also intends to make substantial contributions to a successful new phase in transatlantic relations. To this end, the BDI, together with the Association of German Chambers of Industry and Commerce (DIHK), the Federation of German Wholesale, Foreign Trade and Services (BGA) and the Association of German Banks (BdB), founded the Transatlantic Business Initiative (TBI) in June 2021. The initiative works to strengthen economic relations between Germany, the United States and Canada and acts as a point of contact for economic policy issues - for the Federal Government, the governments of the United States and Canada, and for EU institutions. Thematically, the TBI is positioned in the areas of trade and investment policy, energy and climate policy, digital and data economy as well as corporate finance.