Marking a new chapter in their rebooted relations, the European Union and the United States are set to inaugurate a brand new Trade and Technology Council to deepen economic ties, coordinate digital policy and ensure that any potential dispute between the two long-time allies is resolved swiftly and efficiently.

Standards for artificial intelligence, the global shortage of semiconductors, screening of foreign investments and human rights violations arising from technology misuse will feature high during the council”s first meeting, scheduled to take place on Wednesday in Pittsburgh, Philadelphia, a city that in recent years has become a tech hub.

The European Union is being represented by two of its heavyweight commissioners: Margrethe Vestager, who oversees the bloc’s digital policy and competition law, and Valdis Dombrovskis, in charge of economic and trade matters. The United States is sending Commerce Secretary Gina Raimondo and Trade Representative Katherine Tai, together with Secretary of State Antony Blinken.

The presence of Blinken, America’s chief diplomat, underscores the foreign policy dimension of the discussions. Although technology is, at its core, an industrial issue, its importance far transcends all economic dimensions: technology has become a powerful geopolitical tool that determines which countries lead the world and which countries lag behind.

Negotiations will have a marked focus on shared democratic values, a deliberate message from the two biggest Western economies that emerging technologies should be developed in line with fundamental rights. The shadow of China is poised to loom large over the meeting. Both the EU and the US acknowledge Beijing as a potent rival but their diplomatic approaches differ in practice.

The Pittsburgh gathering comes in the heels of the recent diplomatic row over AUKUS, a military alliance between the US, the UK and Australia meant to counter China’s influence in the Indo-Pacific region. The pact led Canberra to cancel a €50-billion submarine deal with France, a decision that enraged Paris and cast doubt over President Joe Biden’s commitment to renewing EU-US relations.

French officials pressured Brussels into delaying the launch of the Trade and Technology Council (TTC) as a form of retaliation. The move was reportedly opposed by several EU Commissioners and member states, who preferred to treat the AUKUS rift as a bilateral controversy, not an EU-wide problem. A call between President Biden and President Macron helped ease the tension and allowed for the inaugural TTC meeting to proceed as originally planned.

The novel council, the first of its kind in EU-US relations, is seen as an important victory for Brussels, which proposed its creation soon after the 2020 American elections. The idea was part of a wider push to reset ties with Washington and turn the page on four fractious and unpredictable years dealing with the administration of President Donald Trump, a man who publicly denounced the EU as a “foe” and repeatedly acted in defiance of the rules-based multilateral system.

President Biden green-lighted the proposal after an in-person meeting with European Commission President Ursula von der Leyen and European Council Charles Michel in mid-June.

Although no major announcements are foreseen to come out from Pittsburgh, both sides will seize the moment to clearly lay out their policy priorities and design the overall direction for the next rounds of talks. The council is expected to meet periodically at political level.

Chips, AI and data transfers

The Trade and Technology Council is structured into 10 thematic working groups: technology standards (including artificial intelligence and emerging technologies), green tech, supply chains, data governance, ICT security, technology misuse, export controls, investment screening, SMEs support and global trade challenges.

EU officials have already said the TTC is not meant to produce a trade deal or any sort of joint legally binding regulation. Instead, the working groups will be centred on expanding existing ties, facilitating cooperation and promoting mutual research, investment and innovation. The two sides might also agree on a minimum of rules and guidelines to synchronise their regulatory frameworks.

Among the most pressing issues on the agenda will be semiconductors, the microchips that power millions of ordinary electronic devices, such as smartphones, computers and washing machines.

The world is facing an acute shortage of semiconductors due to supply chain disruptions caused by the coronavirus pandemic, a sudden economic recovery and ongoing trade tensions. The crisis, which shows no signs of abetting, has hit European and American companies and caused production delays.

The scarcity of chips has also shed light on the highly unbalanced distribution of the market, which is dominated by Taiwan in an almost-monopolistic fashion, followed by South Korea and China.

Both the EU and the US resent their small market share (over 10% each) and are developing policy proposals to boost domestic production and mitigate their overreliance on South Asia. The European Commission is working on a European Chips Act while the US Congress is debating a CHIPS For America Act, efforts that could be streamlined through the new council.

Artificial intelligence is expected to be an equally prominent topic in the negotiations. The European Union has put forward pioneering legislation to categorise and regulate AI-powered technologies according to their potential risk to human wellbeing.

The United States, a country traditionally reluctant to far-reaching regulation, hasn’t presented anything of the kind but the Biden administration has brought together an AI task force to examine, among other matters, “societal, ethical, legal, safety, and security matters” related to the technology.

The TTC doesn’t mean the US has to eventually adapt the EU rules but can lay the ground for mutually agreed minimum standards that AI and other emerging technologies must respect on both sides of the Atlantic. The partners hope their collective economic and political influence will create a spill-over effect so that other countries recognise and incorporate the standards at domestic level.

Other relevant issues on the council’s table include the screening of foreign investments (mainly to prevent foreign takeovers of crucial industries), mergers in the digital economy and their impact on free competition, the languishing reform of the World Trade Organisation and the question of forced labour. More controversial and sensitive subjects, such as farm subsidies and government procurement, are unlikely to be brought up by the working groups.

The United States is also eager to discuss EU-US data transfers, which underpin billions of dollars of digital trade. Last year, the European Court of Justice invalidated Privacy Shield, the agreement that allowed data to flow across the Atlantic, arguing it failed to ensure an “adequate level of protection” and left EU citizens vulnerable to US surveillance. The bloc’s strict data privacy regulation, known as GDPR, doesn’t have a nationwide equivalent in America, although some states, like California, have introduced similar versions.

The Luxembourg ruling left data flows hanging by a thread, only allowing them in the case of standard contractual clauses. Negotiations to replace Privacy Shield have been taking place since the verdict, but no major progress has been so far reported despite American insistence. The European Commission wants to ensure the new scheme respects the court’s ruling and is not once again struck down. (Privacy Shield’s predecessor, Safe Harbour, had to been annulled.)

Under Beijing’s shadow

Is the Trade and Technology Council a tool to neutralise China’s ever-expanding power on the world stage? The thorny question will loom large — and likely remain unanswered — during the Pittsburgh inauguration and all the subsequent meetings.

The joint EU-US declaration of June only mentioned China twice in the context of the territorial disputes in the South China Sea and the Taiwan Strait. But, in the section devoted to the TTC, the allies did make a pointed reference to fighting “unfair trade practices, in particular, those posed by nonmarket economies that are undermining the world trading system”.

Washington and Brussels have long accused Beijing of using its state-owned, heavily-subsided companies to distort free competition and gain a disproportionate advantage against liberalised economies. The cheap exports of Chinese steel and aluminium have been credited with depressed prices for American and European companies.

The TTC’s explicit emphasis on the misuse of technology that threatens “security and human rights” is also seen as a rebuke to Beijing. The Chinese government has installed a high-tech system of mass surveillance across the country to monitor and control the behaviour of its citizens. The Internet is censored through the so-called “Great Firewall” while the streets are replete with millions of cameras and facial recognition devices.

The US and the EU view this state apparatus as excessively intrusive and in breach of fundamental rights, which China often dismisses as Western ideology. The Atlantic partners, together with linked-minded countries, have vowed to inject human rights into technology to prevent China’s heavy-handed, unchecked approach from becoming the global norm.

“China doesn’t share our values. They don’t share our values around privacy. They don’t share our values around human rights protections or our strong and free democracy, and free and open society. So we, together with Europe, need to write the rules of the road,” Secretary Raimondo told Euronews during Biden’s Europe tour in June.

“The real strategy is to have a strong America and a strong EU, [a] strong American industry and innovation and entrepreneurship, and the same here in Europe because together we are stronger. I think that is the best way to have our strategy succeed as it relates to China.”

But taking the gloves off against China isn’t the EU’s preferred course of action. Fearful of a new Cold War, Brussels advocates a third way through a more flexible and pragmatic vision. A 2020 strategic paper defines China as a “cooperation partner, a negotiation partner, an economic competitor and a systematic rival”, a characterisation that EU officials regularly quote.

It remains to be seen how much the Biden administration will push to steer the new council towards an overtly anti-China path. Brussels considers the TTC as “too big to fail” because a significant part of the EU’s agenda is dependent on international cooperation and the good functioning of the multilateral system. But as Beijing’s technological might and political clout continue to increase, the China question, whether explicit or implicit, will find a way to sneak into the conversation.