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America and the European Union are stronger together


The relationship between the EU and America these days has me in mind the turbulent celebrity couples on the red carpet – smiling at the camera, acting as if everything is fine, but in privacy, we all know, they’re anything but content.

At the recent G7 summit, there were happy photo shoots and even some progress on trade disputes, such as the armistice between Airbus and Boeing. But basically, Europeans remain deeply skeptical about whether the Biden administration is just a stop on the road to another bout of toxic populism. Meanwhile, Americans are frustrated with Europeans as they juggle their bets between a tighter transatlantic alliance or a closer relationship with China.

It doesn’t have to be this way. In fact, it doesn’t have to be. If the EU really wants to protect liberal values ​​in an age of surveillance capitalism, it needs America. And if the United States really wants to decouple from China economically in strategic areas such as semiconductors, green batteries and electric vehicles, it needs demand from more than just the domestic market. There is a low hanging fruit to be picked here. But it does require some real sympathy and understanding on both sides.

First, Europeans should not mistake America’s New Industrial Strategy, outlined last week by President Brian Daisy’s National Economic Council Director, with protectionism. It just brings the United States into line with what most other developed countries and many developing countries are doing as part of normal economic planning — making strategic investments in high-growth technologies and using the power of government procurement to support domestic workers and businesses.

Moreover, the plan aims to create more domestic and global economic resilience, in part by creating more geographic redundancy in regions such as semiconductors, where 75 percent of capacity is concentrated in China and East Asia, according to a recent Boston Consulting Group report. Nearly all of the world’s most advanced semiconductor manufacturing capacity – about 92 percent – is located in Taiwan.

Does anyone think this is a good idea given the geopolitics of the area? Europeans certainly don’t, hence the “digital compass“To double their share of chip production by 2030. The US Senate’s $52 billion bill to boost domestic semiconductor production is a good complement to that. But the truth is that it will take a decade or more to rebuild the US industrial base in the form of chips, and even then , the United States will need partners to create enough demand to make Economic scale For industry such as semiconductor work.

Allies such as Japan and South Korea, but also countries such as the Netherlands, can play an important role in reshaping semiconductor supply chains. Less focus – regionally and within specific companies – would be good for global markets. In an ideal world, U.S., European Union, and Asian allies would work together to create common industry standards so that innovation and growing demand would spread across regions in areas such as chips, green batteries, clean technology, and artificial intelligence.

Another way in which the EU and the US can find agreement for now is to “focus on common answers to the challenges that exist within their democracies,” rather than on China, where Europeans do not want to take sides, said Renaud Lassus, minister Counselor for Economic Affairs at the French Embassy in Washington, and author of a book Revival of democracy in America and the angels are better than your natureAnd the Tocquevillian’s call for optimism about the future of the United States.

These challenges could include everything from regulation of big tech companies to shared goals on climate change, perhaps even something as ambitious as putting a price on carbon. Despite the opposition of some European countries, including Poland, it is possible that by July the EU could submit a draft proposal for a carbon adjustment mechanism. The United States has an opportunity to reciprocate with a proposal of its own.

This is a heavy burden on management. The infrastructure deal struck last week by the two parties included a bit of clean energy. But it is a goal that fits with the stated goal of placing climate at the center of its industrial strategy. It will also begin, by proxy, to address some of the common trade concerns about China. Dumping China with steel, for example, would become impossible if there was a real price for carbon.

The Biden administration may use any upcoming “Democracy Summit” convened by the White House as a place to start this work. Already, there is a virtuous circle of brainstorming between the US and the EU in areas like digital privacy, where Europe’s General Data Protection Regulation (GDPR) inspires more aggressive California privacy laws that may one day be adopted nationwide. Antitrust is another such area, the two sides have reported to each other’s efforts to reduce the monopoly power of the platform.

One can imagine more cooperation on issues such as freedom of the press, ways and means to create a digital charter of rights, principles for how to regulate artificial intelligence and genome research, etc.

All of this would go some way to creating a new foundation for the transatlantic relationship, one that focuses more on fixing domestic weaknesses and strengthening regional strengths rather than bashing China. Both sides have a lot to lose by going it alone

rana.foroohar@ft.com



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