America and the EU are stronger together

The relationship between the EU and America these days reminds me of struggling celebrity couples on the red carpet – they smile for the camera and act like everything is fine, but privately we all know that, they are anything but satisfied.

At the recent G7 summit, there were some happy photo ops and even progress around trade disputes, like the Airbus-Boeing truce. But deep down, Europeans remain deeply skeptical about whether the Biden administration is just a step on the road to yet another episode 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 is serious about protecting liberal values ​​in the age of surveillance capitalism, it needs America. And if the United States is serious about decoupling economically from China in strategic areas such as semiconductors, green batteries, and electric vehicles, it needs demand that is not confined to the domestic market. There are hanging fruits to be picked here. But it does require real empathy and understanding on both sides.

First, Europeans should not mistake America’s new industrial strategy, described last week by President Brian Deese’s National Economic Council director, for protectionism. It simply puts the United States in line with what most other developed countries and many developing countries do under normal economic planning – make strategic investments in high growth technologies and harness the power of the markets. governments to support local workers and businesses.

Beyond that, the plan aims to create more national and global economic resilience, in part by creating more geographic redundancy in areas such as semiconductors, where 75% of the capacity is concentrated in China and Asia. from the east, according to a recent BCG report. Almost all of the world’s most advanced semiconductor manufacturing capacity – around 92% – is in Taiwan.

Does anyone really think this is a good idea given the geopolitics of the area? Europeans certainly don’t, hence the EU’s “Digital Compass” plan to double their own share of chip production by 2030. The US Senate’s $ 52 billion bill to boost domestic production semiconductor is a good addition to this. But the truth is that it will take a decade or more to rebuild America’s industrial base into chips, and even then the United States will need partners to create enough demand to make economies of scale work for an industry like semiconductors.

Allies like Japan and South Korea, but also countries like the Netherlands, could all play a crucial role in reconfiguring semiconductor supply chains. Creating less concentration – both regionally and within specific companies – would be good for global markets. In an ideal world, allies of the US, EU and Asia 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 tech and AI.

Another way for the EU and the US to reach an agreement now would be to “focus on common responses to the challenges existing within their democracies”, rather than on China, which the Europeans do not want to take. party, said Renaud Lassus, Minister Counselor for Economic Affairs at the French Embassy in Washington and author of The renewal of democracy in America and the best angels of your nature, a Tocquevillian appeal for optimism about the future of the United States.

These challenges can include everything from Big Tech regulations to common 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 by July the EU could present a draft carbon adjustment mechanism proposal. The United States has the option of responding in kind with a proposal of its own.

It is a heavy burden on the administration; last week’s bipartisan infrastructure deal included little clean energy. But it is the one that would correspond to the stated objective of placing the climate at the center of its own industrial strategy. He would also begin, by proxy, to address some shared trade concerns about China. Chinese steel dumping, for example, would become impossible if there was a real price on carbon.

The Biden administration could use any forthcoming “Democracy Summit” that the White House convenes as a place to begin this work. There is already a virtuous circle of idea sharing between the US and the EU in areas such as digital privacy, with the European General Data Protection Regulation (GDPR) inspiring even more aggressive California privacy laws. confidentiality that could one day be adopted at the national level. Antitrust is another such area, where the two sides informed each other about their efforts to reduce the monopoly power of platforms.

One could imagine more cooperation on issues such as freedom of the press, ways and means of creating a digital bill of rights, the principles of regulation of artificial intelligence and genomic research, etc.

All of this would go some way to creating a new basis for the transatlantic relationship, one focused more on correcting national weaknesses and strengthening regional strengths than bashing China. Both sides have too much to lose by going it alone.

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