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How the EU and the US should overcome their trade and supply chain disputes

Transatlantic affairs / POLICY BRIEF
Georg Riekeles , Charles Lichfield

Date: 05/12/2022
At the third Trade and Technology Council (TTC) ministerial on December 5, trade and supply chain challenges will be at the top of the agenda, but not for the right reasons. Previous aspirations for stronger collaboration and joint initiatives are being overshadowed by new transatlantic trade tensions. The US Inflation Reduction Act’s local content requirements for electric cars and batteries are regarded in Europe as a bid for its manufacturing base and go against prior TTC commitments and WTO rules.

The dispute is the latest among several emerging challenges between the EU and US in building a common approach to secure supply chains—spanning everything from semiconductors to raw materials— and forging common responses to China’s rise as a geostrategic rival. The TTC was set up to avoid and solve such disputes and deepen trade and tech collaboration. At the moment, it is not.

These issues will not be solved in the coming hours leading up to the ministerial. But for the TTC to remain credible, US and EU leaders must show that they have the intention and capacity to overcome these hurdles.

This Policy Brief outlines five tests for the EU-US trade and supply chains agenda for the next six to twelve months:

  1. Joint mapping and information sharing
  2. Shifting from subsidy competition to operational synergies
  3. Overcoming irritants and settling disputes
  4. Embracing the missing agenda by deepening trade
  5. Enlarging the circle to like-minded countries

What is needed are the ‘grand bargains’ and dynamic compromises that can deliver a truly joined-up trade and climate agenda on both sides of the Atlantic. This requires tackling demanding issues such as carbon accounting, subsidies, and the procurement of green technology. There is also a need to deepen the trade and commercial agenda by committing to tackling supply chain challenges, assuaging trade irritants, and salvaging viable elements from previous attempts to deepen trade. Finally, stronger and more transparent stakeholder engagement—at both the ministerial level and the working-group level—is needed to translate the political optimism around the TTC into true momentum.

This policy brief is the product of the European Policy Centre’s collaboration with the Atlantic Council Europe Center on the “EU-US TTC Track 2 Dialogues” series, which aims to foster policy debate and stakeholder dialogue on the issues covered by the US-EU Trade and Technology Council. The EPC’s work on this project is supported by the Confederation of Swedish Enterprise and The Boeing Company.

Read the full paper here.
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