Creating a US-EU partnership on global tech policy: a priority for the Slovenian EU Presidency

The Trade and Technology Council should strive to build a partnership on digital issues as a matter of urgency

/ By Frances G. Burwell, A Distinguished Fellow at the Europe Center of the Atlantic Council and a Senior Director at McLarty Associates

This article was originally published as part of the 2021 edition of Bled Strategic Times, the official gazette of the Bled Strategic Forum (BSF) international conference. You can access the full version of this and other BSF publications by visiting our official website.

The second half of 2021 will be a key time for creating an effective USEU partnership to address the challenges of the digital economy. The European Union (EU) has embarked on a significant effort to create “A Europe Fit for the Digital Age,” headlined by a wave of legislative proposals on content moderation, platform regulation, competition policy, data governance, and artificial intelligence (AI). The still-new Biden administration has not been so focused on digital policy, but its personnel choices and statements on competition policy, supply chains, and the impact of social media on democracy all indicate that the US approach will not be as laissez-faire as in the past.

That the United States and EU reach some consensus on digital and tech policy is no less essential now than the postwar agreement between the US and its allies over the shape of the international trading system. Just as the US and Europe have been major actors in the global trade in goods and services, so too are they now the major markets for new digital imports and exports. In 2019, the United States exported $245 billion in digitally-enabled services to Europe, almost twice those to the entire Asia-Pacific, including China. Even though Europe lacks a global platform company comparable to some US firms, its companies still sent $133 billion in digitally-enabled services to the United States that same year.

But the US and Europe are clearly not the only leaders in the digital economy. China represents a huge and growing domestic market and a state-centric approach to regulation that is proving all too attractive to autocrats around the world. Russia is also a leader among the “techno-authoritarians” and has exhibited an alarming tolerance for cybercriminal activities from within its borders. If the US and EU continue to pursue disconnected approaches toward digital issues, the Chinese and Russian models could truly threaten the idea of a digital economy based on open markets and the rule of law.

The US and EU took an important first step with the launch of the US-EU Trade and Technology Council (TTC) at their June summit. The establishment of the Council is a win itself, as a signal of renewed Transatlantic cooperation and an acknowledgement of the need for on-going US-EU discussions on trade and technology issues today, as well as the global rules for the future. But if the TTC is to be credible, it must have some early wins, including during the remainder of the Slovenian EU presidency.

If the US and EU continue to pursue disconnected approaches toward digital issues, the Chinese and Russian models could truly threaten the idea of a digital economy based on open markets and the rule of law.

The good news is that the announcement of the TTC was preceded by some other positive signs in the US-EU trade relationship. The long-running Boeing-Airbus dispute was put on hold, as both sides agreed to suspend related tariffs for five years. The European Union also agreed to delay until December 2021 retaliatory measures to US tariffs on European steel and aluminium while the parties seek a negotiated solution. These steps highlighted that the initial focus of the TTC is likely to be in the trade sphere rather than the tech arena.

But the TTC is also a technology council, and it should strive to build a partnership on digital issues as a matter of urgency. The Biden administration took some early first steps toward addressing some key Transatlantic digital issues. Its immediate appointment of the official charged with negotiating a new data transfer deal was a welcome indication that the administration understood the fragility of the mechanisms for transferring personal data from the EU to the US in the wake of the Schrems II decision by the European Court of Justice. But despite rumours of a political deal at the US-EU summit, any real settlement still seems far away. The administration’s re-engagement with the OECD process to develop a new global corporate taxation regime has led the EU to delay unveiling its proposed digital services tax (DST) until October. At the same time, the administration does not seem inclined to impose tariff remedies against EU member states that have already implemented DSTs, despite the US Trade Representative’s finding that such taxes discriminate against US companies.

A good first step now toward some early wins would be to expand the discussion on supply chains to include technology infrastructure, including 5G, cloud, server farms, and batteries, among others. A Transatlantic consensus over requirements for secure vendors could help both US and EU suppliers while ensuring security for users’ data.

The EU and US should also embrace the Slovenian presidency’s priority of strengthening cyber resilience. In particular, the TTC could serve as the launching pad for developing a common framework for cybersecurity standards. Such standards could protect critical infrastructure and would be a boon for both US and EU industries. Recent cyberattacks, including ransomware attacks, have affected critical infrastructure in both the United States and the EU, ranging from pipelines to hospitals. Developing cybersecurity standards will be an essential element of ensuring resilience in our infrastructure and even our economies and societies.

Of course, the US and EU will not agree on all issues. Part of the real value of the TTC is the creation of a regular forum that can foster cooperation but also provide opportunities for discussion of differences. This will be especially important as the EU pushes forward with its ambitious legislative agenda. The European Commission has made no secret of its desire that the EU’s new regulations should become global standards, as happened with the General Data Protection Regulation (GDPR).

While the Biden administration has indicated that it will not have a “hands-off” approach toward the major tech companies, it has not provided much clarity on what its priorities will be. There has been little discussion about data governance, a national privacy bill, platform regulation, or AI. A few relevant bills have been introduced in Congress, but most are very limited compared to the comprehensive EU proposals, and few are given any chance of passage amid an overcrowded congressional agenda.

The TTC, with the right guidance and focus from the Slovenian presidency, can foster discussions between the EU and US on data, platforms, and AI, as well as other priorities. At the forefront of that agenda should be developing a greater understanding of how the Data Governance Act, the Digital Services Act (DSA), and the Regulation for Trust and Excellence in AI will affect non-EU companies.

There are two areas where the Biden administration has provided some indication of its likely approach:

• Competition policy: The President’s Executive Order on Promoting Competition in the American Economy charges US competition authorities with reviewing the impact of major tech companies on the economy with a broader scope than simply consumer welfare. The appointments of Tim Wu and Leila Khan to key administration posts are also indications of a more aggressive anti-trust stance. But in contrast to the EU’s proposed Digital Markets Act (DMA), the US approach seems to be more focused on the entire economy, rather than simply the largest tech firms. It is also reliant on traditional anti-trust mechanisms, rather than ex ante regulation that forbids certain behaviors, as in the DMA. Moreover, because the DMA’s definition of “gatekeeper” companies probably means that these rules apply only to a few US-based firms, the political reaction in Washington could be significant. The US-EU summit established a Joint Technology Competition Policy Dialogue along side the TTC. This Dialogue needs to address the differences in US and EU competition approaches before the anticipated finalization of the DMA during the French EU presidency.

• Democracy and content moderation: President Biden himself has been very critical of major social media platforms and the part they have played in spreading conspiracy theories and misinformation. There is an expectation that this will feature at the Summit for Democracy, which the administration is planning for early 2022. Given the US approach to freedom of speech, creating government rules regarding user-generated content on major platforms will be tough. The EU, with its restrictions on “illegal hate speech”, has been much more proactive, developing both a voluntary code of conduct and now the much more rigorous content-moderation provisions of the DSA. Some of those rules are likely to be quite onerous for companies (including US tech), but the US administration can learn much from EU efforts in this area. First, however, the TTC can play an invaluable role in building the Transatlantic consensus on how to move forward in this politically sensitive area.

Although the TTC will certainly help build greater understanding between both partners on approaches to tech and digital policy, it does not mean that the US will converge with the EU or vice versa. There will inevitably be disagreements, especially as the US and EU have traditionally differed considerably in their approach to regulation. But the final few months of the Slovenian presidency can establish a habit of constructive dialogue within the TTC, thus laying a foundation for a joint response to others — with far more nefarious goals — who seek to put forward their version of rules for the digital economy. The US and EU must work together, even when divided over some specifics, to ensure that our digital systems and infrastructure are resilient and that global rules reinforce open markets, multilateralism, and the rule of law. The Slovenian presidency can ensure that the US and EU take the first important steps toward that goal.

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