TTC Needs to Spend 'Much More Time' on Investment Screening, Expert Says

The U.S.-European Union Trade and Technology Council could soon begin prioritizing China issues over Russia, which has dominated much of the group’s time since it was established in 2021, said Frances Burwell, a distinguished fellow at the Atlantic Council’s Europe Center. She also said the TTC should focus more of its energy on investment screening, particularly as both sides consider a new tool to screen certain outbound investments (see 2305110033).

Burwell, speaking during a May 15 event hosted by the American-German Institute, said the TTC has “provided an essential forum for discussion and coordination of some policies,” adding that export controls against Russia “are a prime example.” But she said the body may soon turn from coordinating its trade restrictions against Russia to aligning policies toward China.

“We now see a focus moving towards China, and I think that is going to continue,” said Burwell, a senior director at trade consultant McLarty Associates. But she also warned that the TTC may not always use the word “China” explicitly, which may risk inflaming tensions with Beijing. “I think we in the United States have to get used to that.”

One area where the TTC could soon make progress is around investment screening, she said. Experts have criticized the TTC for not appearing to make much progress on foreign direct investment issues in recent meetings (see 2212120043). “I think the TTC has to address the hard issues,” Burwell said. “We will have to spend much more time in the TTC on investment screening and outward investment if we want to talk about friend-shoring.”

She added that the U.S. must view the TTC as an “avenue” to convincing the EU member states to adopt investment screening regimes. “The member states are crucial on a lot of friend-shoring related, investment related issues,” Burwell said. “We need to make sure that all the parties are aligned.”

Peter Harrell, a former National Security Council official, cautioned against expecting the TTC to deliver “specific concrete deliverables.” He said the body has proven more useful as a mechanism to build relationships between trade policy officials rather than as a forum to introduce new trade restrictions.

“I do think that the strength of relationships and the connections that were built by the TTC in its first year was quite instrumental to the collective response to Russia's invasion of Ukraine in the export control space,” Harrell said. “And I think that really shows the value from the relationship and the understanding of each other's system that might not show up in a sort of a specific TTC deliverable.”

Burwell agreed, saying that even though TTC officials should try to align the EU and U.S. investment screening policies, “we have to stop judging the TTC simply by how many deliverables there are and how specific they are.” She said the body’s working groups are more of a “basis for future coordination” and “not always about exactly what we can do today.”

Burwell said the coordination is especially important as the EU implements a range of new supply chain policies, including ones that seek to limit the bloc’s imports of goods made with forced labor and goods that contribute to deforestation (see 2212070039 and 2212280032). She said some countries, such as Malaysia and Indonesia, are seeking to “counter” the new anti-deforestation law.

“It’s not clear how some of these rules will be implemented. Will it simply be that companies will avoid questionable countries or questionable locations?” she said. “A lot of U.S. companies will be affected, and it's important that we start talking about this, and the TTC is one forum where we can do that.”

Kai Whittaker, member of the German Bundestag, said during the event that both the U.S. and the EU should focus more on “de-risking” as opposed to a strategy that could lead to decoupling from China, echoing comments made by European Commission President Ursula von der Leyen earlier this year (see 2303310036). “De-risking means focusing on building deeper relationships with our friends, rather than simply cutting ourselves off from the rest of the world,” Whittaker said.

He called it “more than incomprehensible” that the U.S. is “resisting a full free trade agreement” with the EU, which could help both sides achieve their de-risking goals. “If America can't imagine implementing a free trade agreement with the free nations of Europe, who else will come into mind?” Whittaker said. “If this arrangement seems impossible, I have little hope to win this long-term battle we're in.”