China Was 'Elephant in the Room' at TTC: ITIF's Atkinson

China was the unmentioned presence lurking among participants in the inaugural meeting Wednesday in Pittsburgh of the U.S.-EU Trade and Technology Council (see 2109290006), agreed panelists on a Center for Strategic and International Studies webinar Friday to discuss key takeaways. They agreed the meeting was a moderate success for setting in motion 10 working groups to address specific tasks before the TTC meets again in the spring.

On a success scale of one to 10, the meeting “was easily a seven and a half, given that expectations weren’t super-high to begin with,” said Information Technology and Innovation Foundation President Robert Atkinson. “They laid out a number of specific things” about EU-U.S. cooperation on export controls, investment screening, advancing 5G and 6G, plus improving semiconductor supply chains, he said. “The proof is in the pudding. They’ve got to take action.”

The TTC emerged with “very clear statements about pushing back on some 'nonmarket economies,'” as the EU-U.S. post-meeting communique called them, said Atkinson. The TTC got off to “a good start,” he said. “The real question is whether they can move forward with real concrete steps that implement these very good statements.” China was “the big elephant in the room,” he said. Where there’s "real opportunity and motivation for deep cooperation" between the EU and U.S. is in confronting the unfair trade practices and other bad behavior of the large "nonmarket economies" the TTC spoke about, he said.

China, though not mentioned by name in the communique, “clearly is all over the paper,” said Cecilia Malmstrom, nonresident senior fellow at the Peterson Institute for International Economics and former EU trade commissioner. “The Europeans were very eager that this was not going to be a China-bashing meeting,” she said. “Obviously there are some joint concerns over China” between the EU and the U.S., “and they are reflected in the paper, and there are areas where we can certainly cooperate on this,” she said. “But there’s more in this cooperation as well that doesn’t involve China.”

There was “no way a guarantee” the meeting would occur amid the “tensions” created between the U.S. and France over the U.S. submarine deal with Australia and the U.K., plus the uncertainty of the German election that was “occurring right on top of this,” said Melissa Griffith, senior program associate at the Wilson Center think tank. There are “some real debates” between the U.S. and Europe, “and within Europe,” over how tech policy “should intersect with China, the country that shall not be named in the written statements coming out of this agreement,” she said. China gives the EU and the U.S. “this excuse” to have the conversations about policy divides that “we needed to have,” she said.

There’s sentiment in the U.S. that Europe “has taken advantage” of American trade tensions with China, and isn't stepping up to confront Beijing, said Atkinson. He worries the barrier of resulting EU-U.S. mistrust could impede cooperation within the TTC, he said. “We see ourselves as pushing back against essentially a Leninist-Maoist regime that is dictatorial and tries to impose their economic and world views and human rights on other countries.” The “view” in the U.S. is that Europe “is not doing enough to help us,” he said. “Both sides have to figure out how we want to go forward working together” on the China issue, he said.

Many in Europe agree with Atkinson’s “description” of EU states not doing enough on China, said Malmstrom. “The problem is that the EU is 27 countries when it comes to foreign policy.” China is “one of the few areas” of foreign relations where the EU lacks unanimity of opinion, she said. “There are variations in different capitals on how you express yourself on China, depending on economic dependence and historical links.”

It’s difficult for EU members “to come to a hard, common line on China, even if the feeling is more or less the same” country to country, said Malmstrom. Another complication between the U.S. and Europe is that the EU “tradition is not to have trade wars” as the Trump administration espoused and the Biden administration “kind of continues,” she said. The EU favors “more working with other means,” she said.

The TTC agreed an EU-U.S. working group would cooperate to “identify gaps” and “shared vulnerabilities” in the semiconductor supply chain and explore opportunities to bolster chip “R&D and manufacturing ecosystems,” said an Office of the U.S. Trade Representative fact sheet. Atkinson thinks “the odds” of EU-U.S. cooperation on the chips shortage “are stronger than the odds of conflict here” on the order of another Airbus-Boeing dispute, he said. The Chinese are “the ones that bring us together,” he said. That Beijing is injecting its semiconductor industry with more than $100 billion in “illegal and inappropriate production subsidies” through the state-owned Comac aerospace giant is “what’s going to bring us together,” he said. “It’s not going to force us apart.” The Chinese Foreign Affairs Ministry didn’t comment.

There’s “a lot of good synergy” in the EU-U.S. “strengths in semiconductors,” and that bodes well for “the ability to build off each other,” especially in finding “short-term” fixes for the chips shortage, said Griffith. The “incumbent players” in the global semiconductor industry are “largely” non-Chinese, she said. China is investing “significant amount of monies to become a dominant player in that ecosystem,” said Griffith. “A lot of positions of strength” in chips are “inhabited by” U.S., European and Asian companies other than China, she said. She pointed out that the TTC’s work is “a U.S.-EU conversation,” and semiconductors “are not just a U.S.-EU conversation.”