United States and European Union Outline Plans for Cooperation on Trade and Technology

On May 16, 2022, senior officials from the United States and the European Union concluded the second meeting of the US-EU Trade and Technology Council (TTC) in Paris-Saclay, France.  US Secretary of Commerce Gina Raimondo, US Trade Representative Katherine Tai, European Commission Executive Vice President Margrethe Vestager, and European Commission Executive Vice President Valdis Dombrovskis led the meeting as Co-Chairs of the TTC.  Following the meeting, the parties issued a Joint Statement that outlines the progress of the TTC and its ten working groups since last autumn, as well as plans for future cooperation on issues such as critical supply chains, technology standards, export controls, climate, and unfair trade practices. 

In keeping with the TTC's status as forum for consultations, rather than the negotiation of binding legal outcomes, the initiatives described in the Joint Statement focus primarily on expanding information sharing between the two governments, articulating shared principles and concerns, working to voluntarily harmonize standards and approaches where possible, and advancing shared interests on a global basis.  Among other things, the Joint Statement broadly affirms the participants' intentions to "continue to oppose actors who threaten the multilateral rules-based order and fundamental principles of international law," and to continue "coordinating our actions to mitigate the negative impacts of Russia's aggression against Ukraine[.]"  With respect to trade, the participants have committed to "intensify our work to resolve trade disagreements to our mutual advantage, reduce unnecessary barriers to bilateral trade and investment, and strive to prevent new ones from emerging[.]"  The parties also recognize "the need to reform the WTO," and to take "effective action to address trade-distortive non-market policies and practices."   

Beyond these general principles, the Joint Statement incorporates reports from the TTC's ten working groups outlining progress on specific issues.  Some of the most notable outcomes and commitments documented by the working groups include the following:

Technology Standards

Recognizing that the establishment of "better aligned and interoperable technology standards" would facilitate trade, this working group seeks to foster the development of such standards and to "reduce non-tariff barriers in key technology areas[.]"  Accordingly, as of May 16, 2022, the US and EU have established a "Strategic Standardisation Information" ("SSI") mechanism with the aim to "encourage engagement in new standardization opportunities" and "explore taking coordinated action if standardization activities pose a challenge to US-EU strategic interests and values."  The working group is also developing a list of critical and emerging technologies that it will prioritize in its efforts coordinate technology standards.  Such technologies include additive manufacturing, megawatt charging systems for heavy-duty recharging points, recycling of materials, "digital identity," and "Internet of Things."

Global Trade Challenges

The working group on global trade challenges has focused on four general areas: (1) avoiding unnecessary trade barriers; (2) cooperation on "non-market policies and practices;" (3) trade and labor; and (4) trade and environment.  Notable outcomes and commitments in these areas include the following:

• Avoiding unnecessary trade barriers.  The parties will seek to facilitate trade by (1) exploring the use of digital tools for regulatory approvals and conformity assessments; (2) identifying specific areas or products where cooperation on conformity assessment could facilitate trade; (3) expanding cooperation in the area of government procurement; (4) identifying measures that will facilitate trade with Ukraine; and (5) seeking to avoid "unintended consequences of domestic requirements that could create unnecessary barriers to trade and investment, notably for critical products/areas[.]"  
• Cooperation on "non-market policies and practices."  The parties plan to develop "joint or coordinated strategies, using available policies and tools," aimed at countering the impact of "non-market, trade-distortive policies and practices" on technological development and competitiveness in key sectors, such as medical devices.  Additional sectors may be prioritized in the future.  When using domestic tools to address unfair practices, the United States and the EU "will seek to consult or coordinate with each other, with a view to avoiding or mitigating unintended consequences for each other, where possible." 
• Labor.  The parties intend to collaborate on the promotion of internationally recognized labor rights in global supply chains, mostly through the exchange of information on best practices (e.g., for combatting forced labor) and work in multilateral fora.  They have also announced the establishment of a new tripartite trade and labor dialogue ("TALD"), involving relevant representatives of the US Government, the European Commission, and US and EU trade unions and businesses.
• Environment.  The parties intend to "take a leading role in using trade policy and tools to support climate and environmental policy goals[.]"  In addition to exchanging information, they have agreed that these efforts should include cooperation on the implementation of the WTO statement on the Trade and Environmental Sustainability Structured Discussions.  Such efforts will focus on (1) enabling a "trade facilitative approach" to remanufacturing, refurbishment, repair, and direct reuse; and (2) "fostering better understanding of the role of trade" in disseminating goods and services to meet environmental and climate goals.

Climate and Clean Tech 

The climate and clean tech working group is focused on three main areas: (1) promoting green public procurement policies; (2) aligning methodologies for calculating the carbon footprint of selected products, and (3) advancing electro-mobility and interoperability with smart grids.  With respect to procurement, the parties "intend to work towards a joint US-EU initiative incorporating sustainability considerations in public procurement," though these discussions currently are limited to "joint mapping of policies and a joint catalogue of best practices[.]"  The parties have also begun "expert-level exchanges" on methodologies for measuring the carbon footprint of selected products.  

Secure Supply Chains

The working group on secure supply chains has focused on identifying and addressing shared vulnerabilities in areas such as semiconductors, solar panels, rare earth magnets, and critical minerals.  Key updates in these areas include the following:

• Semiconductors.  US government agencies and the European Commission intend to participate in a two-month pilot to develop an "early warning system" for semiconductor supply chain disruptions.  Additionally, the parties have articulated a "common goal" to limit semiconductor subsidies "to what is necessary, appropriate and proportionate to achieve public policy objectives," in order to avoid subsidy races.  The parties are "determined to provide any support for this sector in line with WTO rules."
• Solar products.  The parties "pledge to cooperate on respective project development and the design of financing tools" and on "bolstering solar manufacturing capacity that adheres to shared environmental, social, and quality standards[.]"  They also will aim to "alleviate existing supply chain concentration, actively working together to address market access barriers and distortions to US-EU trade and investments[.]"  Additionally, the parties will "work to minimise the impact of any protective measures on their respective industries[.]"
• Rare earth magnets.  The parties plan on "redoubling and refocusing efforts" through the TTC and relevant multilateral initiatives "to continue address rare earth elements supply chain vulnerabilities and to promote undistorted trade throughout the rare earth supply chain."  Such initiatives include the Conference on Critical Materials and Minerals between the European Union, the United States, Japan, Australia and Canada.  The parties have expressed their resolve "to preserve the openness of the transatlantic supply chains" in this sector.

ICTS Security and Competitiveness

Among other initiatives, the parties have launched a dedicated task force on "joint US-EU public financing for secure and resilient connectivity and ICTS supply chains in third countries."  This task force will promote the use of "trusted/non-high-risk suppliers" in third countries and share information on US and EU efforts to support "secure, resilient, and rights-respecting ICTS projects" in third countries.  The task force's efforts will support US and EU "flagship infrastructure initiatives" by prioritizing "high-quality" ICTS infrastructure projects that promote principles of security, transparency, and competition.

Export controls

The export controls working group noted that the United States and EU have achieved an "unprecedented" level of cooperation in limiting exports of dual-use items and strategic technologies to Russia following its actions in Ukraine. Going forward, the parties "intend[] to continue to regularly exchange pertinent information [on export controls], with an initial focus on Russia and other potential sanctions evaders."  They also will seek to work with third countries on export controls "in a joint and structured effort to uphold international peace and security" and counter circumvention.  The parties also plan to exchange information and pursue coordination with respect to licensing practices, approaches to emerging technologies, and implementation of export controls.  

Investment Screening

At this stage, the working group on investment screening is focused primarily on sharing information and best practices.  Information exchanges thus far have focused on foreign direct investment trends, trends in investments from certain countries of origin, transaction structures of interest, and implementation of the parties' respective investment screening regimes.  Moving forward, the working group intends to continue these information exchanges, and to develop a "holistic view" of security risks related to specific sensitive technologies and policy tools for addressing them.  

Outlook

The TTC's work reflects important shifts in the format, substance, and ambition of transatlantic engagement on trade issues.  Prior initiatives such as the proposed Transatlantic Trade and Investment Partnership focused on liberalizing trade in a comprehensive and legally binding manner.  By contrast, the TTC reflects a strong focus on mitigating shared vulnerabilities and risks – including climate, geopolitical, national security, and supply chain risks – through mostly voluntary initiatives and policy coordination.  The TTC has yielded aspirational commitments to avoid "unnecessary" escalation of transatlantic trade barriers, but has dedicated relatively little attention to expanding trade, compared to other priorities.  Nevertheless, some TTC initiatives such as the proposed alignment of technology standards and conformity assessments have the potential to facilitate trade, and therefore are important priorities for the US business community.

Additionally, there are indications that the TTC's work may feed into other important bilateral and plurilateral initiatives.  For example, the TTC's efforts to align methodologies for calculating the carbon footprint of key products may inform the ongoing US-EU negotiation for a Global Arrangement on steel and aluminum trade, and subsequent policies developed pursuant to that arrangement.  Moreover, Secretary Raimondo has announced that the US and EU intend to work toward a "concrete alignment" on export controls by the time of the next TTC ministerial at the end of this year, with a likely focus on semiconductors.  She suggested that this arrangement could be broadened to include additional countries such as Japan in order to enhance its effectiveness.  Commissioner Vestager has raised the possibility of other "TTC spinoffs," including a potential "framework" to spur investment in critical minerals in countries such as Canada and Australia.  These initiatives could magnify the impact of the work done in the TTC.

The Joint Statement can be viewed here.  

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

_{© 2022 White & Case LLP}