Insight 1998
-
20
23
Turning down the heat on transatlantic tech and trade by Zach Meyers, 31 January 2023 The EU and US are adopting different approaches to trade and investment in technology with China. But their mutual mistrust is unwarranted. The US and EU are trying hard to increase their co-operation on technology and trade matters, including through the Trade and Technology Council (TTC) and dialogues on transatlantic data flows and on subsidies. Having learnt from past fruitless efforts at tech co-operation, the EU and US are keeping their ambitions modest: neither expects full regulatory co-ordination nor many headline-grabbing achievements. Nevertheless, the new relationship has already achieved some significant breakthroughs: for example, the EU and US are closer than ever to restoring seamless flows of personal data. Ideally, these forums would at least help build trust and encourage the EU and US to keep each other’s interests in mind. But there is still significant mistrust, especially about how to manage trade and investment with China. The EU believes that the Biden administration is using China as a cover for protectionist industrial policy in its Inflation Reduction Act (IRA) and in its technology export controls. And the US is concerned that EU tech regulation unfairly targets US companies and that EU memberstates’ less restrictive approach to China is opportunistic. Yet the US and the EU overstate the harm the other side’s policies will cause them in the long run. They would both benefit from turning down the heat. The Inflation Reduction Act The IRA, which President Biden signed into law in August 2022, provides $490 billion in spending and tax breaks to support green technology, including large subsidies for electric vehicles (EVs). These subsidies are intended to reduce US dependence on China for EV technology. For example, tax credits are only available if minerals and battery components are not sourced from a “foreign entity of concern”. In principle, this objective is sound. China currently produces about 80 per cent of global electric batteries and has more than half of the global market share in processing the minerals essential to these batteries. But China is not the only loser. For some EV subsidies, a proportion of production must take place in the US or a country with which the US has a free trade agreement (FTA). There is no US-EU FTA: so EV production in Europe will not qualify. President Biden insisted the IRA was not meant to harm America’s CER INSIGHT: Turning down the heat on transatlantic tech and trade 31 January 2023
info@cer.EU | WWW.CER.EU
1