Thinking Big: Transatlantic Trade and Technology after Ukraine

But after setting aside their disputes on commercial airplane subsidies, steel and aluminum tariffs, and data flows, it is now time for Washington and Brussels to think bigger.

Russia’s brutal war in Ukraine has underscored just how important the transatlantic relationship remains in a world where authoritarian countries are flexing their military muscle, using economic coercion, and spreading false narratives at home and abroad through disinformation.

But one should not underestimate the risk of old transatlantic cracks re-emerging if the United States and Europe do not seize this moment and hammer out a longer-term agenda, based on common values and the spirit of free and fair competition, that binds their vast economies and markets together.

When senior US and European officials meet in Paris in mid-May for the second gathering of their Trade and Technology Council (TTC), they will need to channel the momentum from the Ukraine conflict to deliver this big leap forward. There are several areas on which they should focus.

First, Russia’s invasion of Ukraine and the coronavirus pandemic have underlined the importance of creating a common, privileged transatlantic space in which the United States and Europe can rely on each other for access to everything from critical minerals to advanced microchips.

In a world where economies of scale are shrinking as decades of unfettered trade and investment come to an end and geopolitical tensions rise, creating the geographic scope and scale to do business will be vital.

Companies that have put too many eggs in the China basket are now reassessing their global footprint. German carmaker Volkswagen recently announced plans to more than double its market share in the United States to 10 percent by 2030. But firms that are pivoting away from China will need assurances that they will not bump up against “Made in America” or “European strategic autonomy” hurdles that favor domestic producers at the expense of those from allied nations.

In a world where economies of scale are shrinking as decades of unfettered trade and investment come to an end and geopolitical tensions rise, creating the geographic scope and scale to do business will be vital. Here, the United States and Europe must up their game.

A prime example is in the area of green technologies. As countries turn away from Russian fossil fuels and invest heavily in renewables, there is a risk that their dependencies on China will rise. In wind, solar, and electric batteries, China is a dominant player in key parts of the value chain. This will force hard questions in Europe and the United States about how to reconcile decarbonization goals with the push for supply-chain security. Only through the development of a truly transatlantic market—with formal and informal barriers to trade stripped away—can this transition be navigated responsibly.

Reviving talks on a transatlantic free trade agreement, as some European officials have called for, is not the answer. The political hurdles are simply too high on both sides of the Atlantic. But the United States and Europe should commit to working hand in hand on rules and standards for critical technologies, including artificial intelligence, that will shape the global economy in the decades to come. This must include a more joined-up approach in international standards-setting bodies, where China’s influence has risen significantly in recent years.

Reviving talks on a transatlantic free trade agreement, as some European officials have called for, is not the answer. The political hurdles are simply too high on both sides of the Atlantic.

Another crucial area is export controls, where the Russia crisis has demonstrated just how closely the United States and Europe can work together when pushed to do so. Members of the TTC working group on export controls have driven coordination on the sanctions against Moscow. This has created a degree of trust that might have taken many years to build had there been no war.

The two sides must now take this cooperation a step further, creating permanent administrative structures that allow for closer alignment on controlled goods. This needs to start with common definitions for emerging and foundational technologies, and agreement on where the lines on export controls should be responsibly drawn. The United States and Europe should also be moving swiftly to broaden these structures to include allies like Japan. A new multilateral grouping of like-minded countries to address the challenges presented by critical technologies, including cyber-surveillance, is overdue.

On a visit to Delhi last month, European Commission President Ursula von der Leyen announced plans to launch a new Trade and Technology Council with India. This sounds promising. But bringing countries like Canada, Japan, and the United Kingdom into the US-EU TTC discussion on specific issues is a more urgent task.

Lastly, the TTC meeting in Paris should focus on the fight against disinformation. Countering propaganda has become an urgent matter as Russia and China spread the message that Western sanctions are to blame for what is shaping up to be a catastrophic hunger crisis. Since the joint declaration issued by China’s President Xi Jinping and Russia’s President Vladimir Putin on February 4, it has become clear that Beijing and Moscow are also working together to redefine terms like democracy and human rights.

Effectively countering these narratives will depend on whether the United States and Europe can develop a common analytical framework for responding to disinformation and widening it to include other democratic allies. This is not just about China and Russia. Washington will need to strike a balance between supporting homegrown big tech and ensuring US platforms are responding responsibly to the spread of hate speech.

Effectively countering these narratives will depend on whether the United States and Europe can develop a common analytical framework for responding to disinformation and widening it to include other democratic allies.

When the TTC was launched nearly one year ago, it was against a backdrop of lingering transatlantic suspicion. In Europe, there was fear that Washington viewed the forum primarily as a tool to contain China. In Washington, there was concern that the TTC, with its ten working groups, would turn into a cumbersome talking shop that sucked up resources.

But the war in Ukraine has changed this dynamic. The TTC is about more than China. And it has shown that it can deliver results in a real-time crisis.

With nationalist and protectionist voices gaining ground on both sides of the Atlantic, building a common, long-term transatlantic agenda will not be an easy task. The United States and Europe will need to look beyond the narrow political imperatives of the day and think big.

Agatha Kratz is a director at Rhodium Group.