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The relationship between the EU and the current US reminds me of celebrity couples with red carpet issues – they smile on camera and act like everything is fine, but in private, we all know, they are anything but content.
At the recent G7 summit, there were happy photographs and even some progress around trade disputes, such as the Airbus-Boeing truce. But deep down, Europeans remain deeply skeptical about whether the Biden administration is just a roadmap to another attack of toxic populism. Meanwhile, Americans are frustrated with Europeans for hedging their bets between a closer transatlantic alliance or a closer relationship with China.
It doesn’t have to be that way. In fact, it doesn’t have to be. If the EU really wants to protect liberal values in the age of surveillance capitalism, it needs America. And if the United States really wants to break away from China economically in strategic areas like semiconductors, green batteries, and electric vehicles, it needs more demand than the domestic market. There is little hanging fruit to boot here. But it requires some real empathy and understanding on both sides.
First, Europeans should not be wrong about the new US industrial strategy, outlined last week by President Brian Deese’s director of the National Economic Council, for protectionism. It simply puts the United States in line with what most developed countries and many developing countries do as part of normal economic planning: make strategic investments in high-growth technologies and use the power of government procurement to support to local workers and businesses.
Beyond that, the plan aims to create more national and global economic resilience, in part by creating more geographical redundancy in areas such as semiconductors, where 75% of capacity is concentrated in China and East Asia. according to a recent BCG report. Almost all of the world’s most advanced semiconductor manufacturing capacity (approximately 92%) is located in Taiwan.
Does anyone think it’s a good idea considering the geopolitics of the region? Europeans certainly do not, therefore, the EU “Digital compass”We plan to double its own chip production share by 2030. The U.S. Senate bill of $ 52 billion to increase domestic semiconductor production is a good complement to that. But the truth is that it will take a decade or more to rebuild the U.S. industrial base into chips, and even the United States will need partners to create enough demand for economies of scale for an industry like semiconductors.
Allies such as Japan and South Korea, but also countries such as the Netherlands, could play a crucial role in reconfigured semiconductor supply chains. Creating less concentration, both regionally and within specific companies, would be good for global markets. In an ideal world, the United States, the EU, and Asian allies would work together to create common industry standards so that incremental innovation and demand can spread across regions in areas such as chips, green batteries, clean technology and AI.
Another way for the EU and the United States to find an agreement right now would be to “focus on common responses to the challenges within their democracies,” rather than in China, where Europeans do not want to choose. says Renaud Lassus, minister minister for economic affairs at the French embassy in Washington and author of The rebirth of democracy in America and the best angels of your nature, a Tocquevillian call for optimism about the future of the United States.
These challenges can range from regulating big technologies to shared goals on climate change, perhaps even something as ambitious as putting a price on carbon. Despite opposition from some European countries, including Poland, it is possible that in July the EU may present a draft proposal for a carbon adjustment mechanism. The US has the opportunity to respond in kind with its own proposal.
This represents a sharp rise for the administration; last week’s bipartisan infrastructure agreement included little clean energy. But it is one that would fit the stated goal of placing the climate at the center of its own industrial strategy. Also, by representation, it would begin to address certain shared trade concerns about China. Chinese steel dumping, for example, would be impossible if there were a real price of carbon.
The Biden administration could use any “Summit for Democracy” convened by the White House as a venue to begin this work. There is already a virtuous circle of ideas shared between the United States and the EU in areas such as digital privacy, with the European General Data Protection Regulation (GDPR) inspiring even more aggressive California privacy laws that may one day be adopted. at the national level. Antimonopoly is another area of this kind, where both parties have reported each other’s efforts to curb the power of platform monopoly.
One could imagine more cooperation on issues such as freedom of the press, forms and means to create a digital rights statement, principles on how to regulate artificial intelligence and genomic research, and so on.
All of this would contribute, in a way, to creating a new basis for the transatlantic relationship, focusing more on addressing national weaknesses and strengthening regional strengths than on sinking China. Both sides have too much to lose when they go out alone.
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