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Beyond the Trade and Technology Council: National security concerns are changing how policymakers view the global economy

Transatlantic affairs / COMMENTARY
Frederico Mollet

Date: 13/10/2021
The policymakers overseeing globalisation are facing a new range of national security and resilience pressures that are fundamentally reshaping how they interact with a globalised private sector.

The inaugural meeting of the EU–US Trade and Technology Council (TTC) on 28 September was marked by transatlantic drama over AUKUS, the trilateral defence partnership between Australia, the UK and the US. But its first communique met more muted reactions, as it is long on areas for discussion and future cooperation and short on concrete deliverables.

Whether its working groups deliver on its promise of reinvigorated transatlantic relationship or follow the ignominious fate of the Transatlantic Economic Council (TEC) will become clearer at its next meeting. However, in its language and topics of focus, the TTC is illustrative of a broader shift in the relationship between most governments and the global economic system, driven by the combined impact of COVID-19, the rise of great power competition and renewed domestic turn towards industrial policy.  

The de-abstraction of the global economy 

In past trade and economic discussions, governments have focused on setting framework conditions and then stepping back to allow the private sector to build supply chains and allocate resources as it saw fit. There was full confidence in the aggregate efficiency of their decentralised decision-making. 

Previous ill-fated rounds of transatlantic negotiations – the TEC and the Transatlantic Trade and Investment Partnership (TTIP) – focused on regulatory alignment (perhaps the most symbolic dispute being over chlorinated chicken standards). With the exception of relatively circumscribed areas, such as the military and security industrial establishment, as far as the policymakers who oversaw the global economy were concerned, the supply chains that resulted from such agreements and crisscrossed national boundaries in a finely segmented international division of labour were abstracted into aggregate economic data.  

What is noteworthy in the TTC communique is the attention to the concrete workings and geographical locations of specific supply chains and other private sector activities, and the implication that they may have to be actively managed to ensure “security and resilience”. The communique pledges to “increase transparency of supply and demand; map respective existing sectoral capabilities; exchange information on policy measures and research and development priorities, and cooperate on strategies to promote supply chain resilience and diversification.” 

This mirrors domestic efforts in both the EU and the US to come to grips with the intricate and globalised network of supply chains in the midst of the pandemic when bottlenecks arose (and persist) in every conceivable section of said chains, and frantic public efforts were made to scale up vaccine production. In tandem, as part of its growing geopolitical competition with China, the US leveraged its control and influence over key sections of the semiconductor supply chain to deny Beijing access to advanced technologies. This brought into plain view how specific technological and economic interlinkages could become vulnerabilities. The sinews of the global economy have been decidedly ‘de-abstracted’. 

The changing relationship between policymakers and the globalised private sector 

It is far from clear whether the TTC heralds some dirigiste turn. There are domestic moves towards more interventionist industrial policies on both sides of the Atlantic, but these are by no means uncontested internally. Even if the TTC discussions bear fruit, one can also conceive a range of interventions, from the relatively free market, such as expanding bilateral trade agreements to facilitate diversification, to the dirigiste.  

Nevertheless, the TTC text illustrates how policymakers are changing how they analyse, conceptualise, seek knowledge of, and interact with a globalised private economy. Even mapping specific supply chains is a challenging task that involves reshaping governments’ relations with the private sector, as the White House is learning in its struggles to extract their desired information from semiconductor companies. “I don’t want to have to do anything compulsory but if they don’t comply, then they’ll leave me no choice,” in the telling words of US Commerce Secretary Gina Raimondo.  

Other examples of the changing relationship include the communique’s pledge to “develop a common vision and roadmap” for 6G technology. Technological development that has up till now been firmly in the hands of multinational companies in consortia like 3GPP (with substantial and much commented on contributions from Chinese companies) is now a question for intergovernmental negotiations.  

The same can be said for international technology standard-setting, where both EU and US governments have historically been content to give the private sector free rein. But they now pledge in the TTC to develop “both formal and informal cooperation mechanisms to share information regarding technical proposals in specified technology areas and seek opportunities to coordinate on international standards activities.” (Companies have already started to feel this shift at the European level). Export controls and investment screening – the focus of two TTC working groups – are other important areas that require more intrusive monitoring of private sector activities. Although more traditional tools, they have significantly grown in importance over the past few years.  

All in all, the contrasts between the TTIP’s and TEC’s approach and focus are marked. If nothing else, national security systems’ ‘hostile takeover’ of international economics is shifting how the global economy is conceptualised and monitored. In practice, the shift is likely to go further. Brian Dees, the US National Economic Council Director, stated recently, “Our private sector and public policy approach to domestic production prioritized low, short-term costs over security, sustainability, and resilience. [COVID-19] was the wake-up call.” Beyond questions of security and resilience, the demands of the green transition – which require the wholesale restructuring of entire economic sectors – may also start to require greater attention to the specific ways the global economy is structured.  

Beyond the Trade and Technology Council

Whether the TTC will result in substantial joint initiates remains to be seen. The EU and the US also have clearly differing geopolitical stances that could hamper substantial agreement. Case in point, contrast Jake Sullivan and Kurt M. Cambell’s thoughts on Washington’s long-term technological competition with China against Sabine Weyand’s recent defence of trade policy’s ability to tie China into an updated rules-based order. 

However, even if the TTC discussions do not yield bilateral action in these fields, the US is likely to continue unilateral action as well as its efforts to build similar partnerships in the Indo-Pacific. China, meanwhile, has been forthright in its vision for supply chain and technological security. 

The EU seeks to operationalise open strategic autonomy in the face of this growing power competition, not to mention future climate change-related disruptions to supply chains, a disruptive and competitive green transition and likely future pandemics. This goes beyond EU-US relations. At a recent EPC event, the Korean Trade Minister highlighted the need for the EU and Korea to establish a “dialogue channel” to “discuss and troubleshoot issues or problems arising in our supply chains”. Even if the Union continues its efforts to preserve the global rules-based and liberal market order, these pressures make escaping the trend of monitoring the global economy in much greater and disaggregated detail unlikely.

Frederico Mollet is a Policy Analyst in the Europe’s Political Economy programme at the European Policy Centre.

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