Transition from WTO to TTC

After long championing the World Trade Organization (WTO) and its predecessor GATT as the key venue for pursuing its commercial economic interests, the United States shifted more than a decade ago toward building alternative trade architecture.

President Barack Obama’s Trans-Pacific Partnership was aimed at crafting an Asia-Pacific trade bloc that left out China, a plan that was upended by his successor. Now, there’s a new body that warrants close attention, United States-European Union Trade and Technology Council (TTC).

Opened for business in 2021, the TTC this week held its third minister-level gathering. Originally designed by the Biden administration to resolve and manage disputes, it’s been evolving into a forum for coordinating economic approaches to systemic rivals of the US and Europe, specifically Russia and China, reports Bloomberg.

With TTC links between Washington and Brussels bureaucrats set up last year, the council found fresh purpose with Russia’s February invasion of Ukraine, enabling more effective coordination on sanctions and export controls.

The TTC reaction to Vladimir Putin’s aggression is also serving as something of a template for China, should Xi Jinping choose to make war on Taiwan. Indeed, there’s already evidence the TTC is emerging as a forum for the US and Europe to link up on issues concerning Beijing.

On December 05, 2022 the TTC served as a venue for discussing President Joe Biden’s push to hobble China’s semiconductor industry. Coincidentally, Dutch officials are already planning new controls on exports of chip-making equipment to China, potentially aligning with the US efforts to restrict Beijing’s access to high-end technology.

Germany, France and other EU members remain much more hesitant to embrace aggressive moves toward reducing China’s place in global supply chains. German Chancellor Olaf Scholz’s visit to Beijing last month with an entourage of business leaders from his country showcased that dynamic.

But the TTC now provides a permanent venue in which moves against China can be debated. With the WTO’s ability to rule on controversial trade measures effectively crippled by its inability to hear appeals (thanks to Donald Trump), the TTC is fast becoming the West’s preferred platform for hashing out global trade strategy. 

The TTC, along with the less formal US-Japan initiative and Biden’s even-looser Indo-Pacific Economic Framework, aren’t technically focused on tariffs and quotas in the way traditional trade-talk forums or free-trade agreements were. 

Instead, these are aimed at the “soft infrastructure” of global commerce—standards, export controls, transparency requirements, investment reviews and labor and environmental rules, explains Stephen Olson, a former US trade negotiator now at the Hinrich Foundation. 

“The parties are essentially creating ecosystems,” Olson wrote in a note earlier this year. “Integration deepens not as a result of trade-barrier reductions, but rather in response to the need or desirability of doing business with partners that maintain similar labor protections or adhere to compatible technical standards.”

Underscoring the strengthening of US-European digital diplomacy—and an apparent determination to manage differences (like EU tax and regulatory policy toward US tech giants), the EU even opened an office in Silicon Valley.

There of course remain plenty of trans-Atlantic disputes, highlighted by European fury over Biden’s clean-energy and electric-vehicle subsidies in this year’s massive Inflation Reduction Act. This week’s TTC gathering, it turned, out provided another chance to address those.

But the council could become increasingly important in other ways, especially as digital trade and associated regulations develop. The TTC gathering in September of last year called out authoritarian regimes for aiming to use technology to implement social control at scale.

Benjamin Larsen wrote in a Brookings Institution paper this week that the TTC can be viewed as the beginning steps towards forming an alliance around a human rights-oriented approach to the development of artificial intelligence in democratic countries.

In May, the two sides of the TTC took strides in another direction, agreeing to set up a Strategic Standardization Information mechanism to share information on international standards development—an area of increasing Chinese interest, as this newsletter highlighted.

The next TTC session is slated for mid-2023 in Europe. It will likely be a forum well worth watching