The relationship between the EU and the United States today reminds me of the troubled celebrity couples on the red carpet-they smile at the camera and pretend that everything is fine, but in private, we all know that they are not satisfied.
At the recent G7 summit, there were pleasant group photos, and even some progress was made in trade conflicts, such as the truce between Airbus and Boeing. But in the final analysis, Europeans still deeply doubt whether the Biden administration is just a halfway point to another toxic populism. At the same time, Americans are frustrated with Europeans’ bets on a closer transatlantic alliance or a closer relationship with China.
It doesn’t have to be. In fact, it should not be. If the EU really wants to protect free values in the age of surveillance capitalism, it needs the United States. If the United States really wants to decouple economically from China in strategic areas such as semiconductors, green batteries, and electric vehicles, it needs more than the domestic market. Here are some unresolved fruits. But this requires real sympathy and understanding from both sides.
First, Europeans should not mistake the new US industrial strategy outlined last week by Brian Deiss, director of the US President’s National Economic Council, as protectionism. It just aligns the United States with the normal economic planning of most other developed countries and many developing countries—making strategic investments in high-growth technologies and using the power of government procurement to support local workers and businesses.
In addition, the plan aims to create more domestic and global economic resilience, in part by creating more geographic redundancy in areas such as semiconductors. According to a recent BCG report, 75% of the production capacity in these areas is concentrated in China and East Asia. Almost all of the world’s most advanced semiconductor manufacturing capabilities—about 92%—are located in Taiwan.
Considering the geopolitics of the area, does anyone really think this is a good idea? Of course Europeans don’t, so the EU’s “Digital compass“The plan is to double its share of chip production by 2030. The US Senate passed the US$52 billion bill to promote domestic semiconductor production is a good complement to this. But the fact is that it takes ten years to rebuild the foundation of the US chip industry. Years or more, even so, the United States still needs partners to create enough demand to manufacture chips. Economies of scale For jobs in industries like semiconductors.
Allies such as Japan and South Korea, as well as countries such as the Netherlands, can all play a key role in reconfiguring the semiconductor supply chain. Reducing concentration—whether in the region or within a specific company—is a good thing for the global market. In an ideal world, the United States, the European Union, and Asian allies will jointly develop common industry standards so that incremental innovation and demand can spread to various regions in the fields of chips, green batteries, clean technology, and artificial intelligence.
Another way that the EU and the United States now agree is to “focus on common answers to existing challenges in their respective democracies” instead of focusing on China, because Europeans don’t want to choose a side station. Minister Renault, Economic Affairs Counselor of the French Embassy in Washington, as well as The revival of American democracy and the better angel in your nature, Tocqueville called for optimism about the future of the United States.
These challenges may include everything from large-scale technology regulation to the common goal of climate change, and may even be ambitious things like pricing carbon. Despite opposition from some European countries including Poland, the EU may propose a draft carbon adjustment mechanism before July. The United States has the opportunity to respond with its own proposal.
This is a heavy burden for the government. Last week’s bipartisan infrastructure agreement barely touched on clean energy. But it meets the stated goal of putting climate at the center of its own industrial strategy. It will also begin to resolve certain common trade concerns with China through agents. For example, if the real price of carbon exists, Chinese steel dumping will become impossible.
The Biden administration may use any “democracy summit” that the White House is about to convene as a place to start this work. The United States and the European Union have formed a virtuous circle of sharing ideas in areas such as digital privacy. The European General Data Protection Regulation (GDPR) has inspired more radical California privacy laws, which may one day be adopted nationwide. Anti-monopoly is another such area, and both parties have informed each other of their efforts to curb the monopoly power of platforms.
One can imagine more cooperation on issues such as freedom of the press, ways and means to create a digital bill of rights, how to regulate artificial intelligence and genome research.
All of these will to some extent create a new foundation for transatlantic relations, which are more focused on resolving domestic weaknesses and strengthening regional advantages rather than attacking China. Fighting alone, both sides have too many losses.