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Rebuilding Strategy into the Transatlantic Economic Relationship

U.S. Vice President Michael Pence’s February 20 visit to the European Union institutions in Brussels is an opportunity to strengthen the U.S.–EU alliance by building on our unparalleled economic ties.

U.S. Vice President Michael Pence’s February 20 visit to the European Union institutions in Brussels is an opportunity to strengthen the U.S.–EU alliance by building on our unparalleled economic ties. The two sides should consider resurrecting the much-maligned Transatlantic Economic Council (TEC) to set a strategic vision to the relationship under the new U.S. administration, and to lay the foundation for a resumption of the Transatlantic Trade and Investment Partnership (TTIP) negotiations.

A Short History of the Transatlantic Economic Council

Ten years ago, in January 2007, Chancellor Merkel, concerned about the rise of China, used Germany’s presidency of the European Union to suggest to then-President George W. Bush that the two conclude a free trade agreement to boost the global competitiveness of their industry.

At that time, the administration hesitated, mainly fearing that a trade agreement between the world’s two largest economies would derail the World Trade Organization’s “Doha Round” of multilateral trade liberalization.

They offered instead a significant upgrading of the existing relationship, which on April 30 of that year became the Framework for Advancing Transatlantic Economic Integration Between the United States of America and the European Union. The Framework established the Transatlantic Economic Council (TEC), appointed a cabinet-level official in the White House (then the head of the National Economic Council, Allan Hubbard) and an EU Commissioner (then German Vice President Günther Verheugen) as co-chairs, and entrusted the co-chairs with overseeing a wide range of collaborative work spelled out in six annexes (regulatory cooperation, intellectual property, investment, secure trade, financial markets regulation, and innovation and technology).

The first meeting of the TEC, in November 2007, was widely considered by both sides to have been a success,[1] largely because it was well-attended by U.S. cabinet-level participants and EU Commissioners covering a wide range of policy areas (economy and finance, trade and commerce, labor, agriculture, etc.) and because these principals met, without staff, over lunch largely to discuss China. (The meeting occurred shortly after then EU Trade Commissioner Peter Mandelson wrote to President Barroso about how the EU needed to stop playing the “good cop” to America’s “bad cop” with Beijing.)[2] This TEC discussion had concrete outcomes: U.S. and EU officials from a wide range of policy areas gathered together shortly afterward to discuss their various negotiations with China, and shortly after that Washington and Brussels joined their cases in the WTO against China’s unfair trade practices in auto parts.

Subsequent meetings of the TEC, unfortunately, quickly became entangled in bilateral disputes, as the U.S. side sought “proof” that the EU could overcome what Washington saw as a nonsensical barrier to trade — the EU refusal to allow imports of U.S. poultry meat because of the U.S. requirement that poultry meat needed to be disinfected with an “anti-microbial/pathogen-reduction treatment,” rather than fresh water as in the EU requirement. The EU had its own demand — that the United States allow the import of low-voltage electrical appliances based on a “suppliers’ declaration of conformity” (SDOC), rather than requiring third parties to ensure that such appliances met U.S. safety requirements.

The “chlorinated chicken” debate quickly came to symbolize the TEC, and for many in Europe the U.S.–EU economic relationship itself. Despite actually having accomplished a majority of the items in its long work-program, the TEC essentially petered out (the last two “meetings” by the “TEC facilitators” rather than co-chairs were by video-conference), to be replaced by the more ambitious negotiations toward a full-fledged transatlantic FTA, TTIP.

Back to the Future

Now that the TTIP negotiations too have faltered, with the Obama administration and the Juncker Commission unable to complete them on the “one tank of gas” promised by then-U.S. Trade Representative Michael Froman, it might seem dubious at best to suggest resurrecting the much-derided “chlor-hünchen” TEC.

And yet:

The TEC exists. It was a U.S. idea under a Republican administration. It was signed by the leader of the most powerful economy in Europe, who is still in office, and endorsed at the time by all Mrs. Merkel’s EU counterparts.

And most critically, it can bring the most important economic policy leaders of the United States and the European Union together to explore the major policy issues facing the transatlantic economy, and to chart a strategic direction.

That strategic direction is clearly needed now, with the new administration in the United States still getting situated, and leaning toward domestic and international economic policies (a major fiscal expansion, a border adjustment tax, withdrawal from trade agreements and a “robust” approach to China, to name a few) that will have a global impact and that unsettle European leaders. Further, even as TTIP stalls, the need for U.S. and EU officials to continue working on a range of issues

The original idea is sound. Mr. Pence could use his visit to suggest dusting it off, and perhaps giving the wilted frame a bit more flesh.

— Name the positions to be included. For instance, a core group that could include on the U.S. side, the secretaries of agriculture, commerce, labor, and treasury, as well as the U.S. trade representative; on the EU side, the commission vice president for jobs, growth, investment, and competitiveness and the commissioners for agriculture, employment, internal market, and trade. Bring in others as needed.

— Limit meetings to once a year.

— Start with a principals’ only lunch at which 2-3 clearly strategic issues can be appropriately discussed from a multi-disciplinary perspective. Then allow the principals to have more extended follow-up bilateral discussions with their counterparts.

— Identify co-chairs who are not the TEC “leads,” but who have the authority to take on the responsibility of two functions: (a) to prepare the principals’ meeting and (b) to oversee the collaborative transatlantic work of agencies, probably the White House advisor responsible for international economic policy and the Secretary General of the Commission.

Even the United States needs allies to be truly great. Europe is and should be the ally of choice, not least given the unique, almost symbiotic, relationship between the two economies. Resurrecting the Transatlantic Economic Council to frame a strategic vision for the economic relationship under the new administration in Washington makes sense — it is an existing tool; it is not a legacy from the previous administration; and the two sides confront numerous major issues that would benefit from a multi-disciplinary political-level review. Managing China’s transition toward a more balanced economy is one of the fundamental challenges the two share, but so too is finding a different approach to TTIP — which would be the first Congressionally-approved treaty-based relationship binding the two allies together.

Mr. Pence’s visit provides an opportunity to move transatlantic relations back toward a more constructive footing. Let’s hope he uses it.

 

Read more on the future of U.S. economic policy: 

What America's Economy First Means for Europe

 

 

Photo credit: Gage Skidmore

 

 

[1] US Department of State, “Readout of the First Meeting of the Transatlantic Economic Council,” November 9, 2007.

[2] See “Mandelson warning on China Trade,” BBC News, October 17, 2007.