The Wider View

Sep 30, 2021

TTC Lift-off: The Euro-Atlantic Tech Alliance Takes Shape

The first meeting in Pittsburgh of the EU-US Trade and Technology Council (TTC) underlined the geopolitical importance of a promising endeavor. All pieces are there, but now some assembly is required.

US Secretary of State Antony Blinken is flanked by Commerce Secretary Gina Raimondo and Trade Representative Katherine Tai as they meet with European Commission Executive Vice Presidents Margrethe Vestager and Valdis Dombrovskis during U.S and European Union trade and investment talks in Pittsburgh, Pennsylvania, September 29, 2021.
All rights reserved

As John Steinbeck once wrote, “to find where you are going, you must know where you are.”  The choice of Pittsburgh to inaugurate the EU-US Trade and Technology Council (TTC) was no accident. Over the past decade, the coal and steel titan has been reborn as a world-leading research hub in artificial intelligence (AI), headquarters to the largest lunar logistics robots and home to world’s first Computer Emergency Response Team (CERT). Against this backdrop, Executive European Commission Vice Presidents Margrethe Vestager and Vladis Dombrovskis came together in Pittsburgh on September 29 with Commerce Secretary Gina Raimondo, Secretary of State Antony Blinken, and US Trade Representative Katherine Tai for the first TTC meeting.

The European Union and United States remain the two great democratic tech blocs, amid a techno-autocratic China, revisionist Russia, and rising India. In many ways, given their shared values, innovation industrial base, market size, and regulatory power, they could be the hidden G2 for democratic tech governance. The TTC meeting is the first to bring together top officials who have presided over 10 working groups huddling on everything from technical standards to clean tech to data governance. Work will be done across multiple fields including WTO collaboration, supply chain security as well as support for small businesses, workers, and underrepresented communities.

But at its heart, the TTC is the embryonic basis for a Euro-Atlantic tech alliance. As such, it is worth looking at the initial objectives in three broadly defined baskets: 1) tech industrial resilience with semiconductors at its heart, 2) technology access and control using levers of dual use exports and investment screening; and 3) the technical standards and regulatory rule book, particularly in AI and online content.

From Supply Chain Security to Strategic Interdependence

On semiconductor cooperation—a core supply chain and tech industrial policy issue on both sides of the Atlantic—the TTC is confronting a small, medium, and super-sized formula. The least ambitious would focus solely on supply chain transparency and the promise not to cut off the other side of the Atlantic to key equipment, design IP, or scarce chips needed to power each side. This “supply chain security and resilience option” seems most likely in the short-term. There are other, more ambitious options. A middle option would be to graft the transatlantic chip R&D ecosystem more closely together—allowing greater cooperation, for instance, between the National Semiconductor Technology Center (NSTC) in Albany, New York, and Europe’s research hubs like the Interuniversity Microelectronics Centre (IMEC) in Belgium, Fraunhofer in Germany and CEA-Leti in France. Funding for R&D projects through the National Science Foundation and the €93-billion Horizon Europe framework programs could deepen the Euro-Atlantic R&D base for semiconductors. 

Greater still would be the “strategic interdependence” option—using transatlantic consortia to bring together the US CHIPS Act and newly announced European Chips Act with companies like Intel, IBM, Infineon, ARM, ASML, STMicron to enmesh high-end semiconductor production at all stages of the production cycle from design to fabrication. The recognition that the partnership must be “balanced and of equal interest for both sides” is an acknowledgement that Europe also has a geostrategic stake in research and fabrication on its territory as a fundament of its quest for technological sovereignty. Basing semiconductor cooperation solely on Europe providing ASML’s high-end equipment to the US will be a non-starter. A maximalist option might prove most appealing.

The “dedicated track on semiconductors” provides a runway for a more ambitious option at the next TTC meeting scheduled to take place in spring 2022. That would be during the French EU Council presidency and right before French presidential elections. One could imagine a second TTC setting the stage for French leadership in Europe on semiconductors, perhaps even a fab in France turning the country into Europe’s hub for high end chips. The pieces are all there.

Democratic Autonomy through Technology Access and Control

Perhaps most interestingly is the rewiring of technology access and control. Technology in areas like AI, gaming, chips, mobile network equipment, and even smart phones has become a vector for surveillance and national security. As such, the US and EU focused heavily in Pittsburgh on deepening “democratic autonomy”—the capacity of the Euro-Atlantic space to maintain access and control over key technologies through stepped-up export controls and investment screening.

Both sides want to update dual-use guidance on traditional dual-use technology areas like nuclear, chemical, and cyber in the Wassenaar context to include emerging technologies like AI and quantum computing. In particular, the two highlight the menace of state-backed cyber-surveillance as a growing reality in global emerging tech trade as weak democracies and would-be authoritarians look to China’s budding AI-backed internal panopticon as a means of clinging to power and suppressing opposition.

The two are also working to deepen investment screening cooperation. Currently, 19 European member states have investment screening mechanisms in place. The European Commission is working to coordinate and broker information-sharing across these days to harden the EU space to malicious investment. The recent German FDI investigation of Tencent’s attempt to acquire the Frankfurt-based gaming company, Crytek, is just one example. Many European member states have been staffing up to deal with caseloads around potential emerging disruptive technology. The German defense ministry alone has added around 10 new staff members to address M&A mostly looking at Chinese FDI pouring into the country in search of cutting edge tech in areas like Germany’s booming health AI start-up scene.

The EU and US agreed to work on coordination and information-sharing on macro-trends in investment screening, ways of assessing risk, and technical consultations on what critical technology definitions and criteria. In dual-use exports, they are looking to drive convergent approaches, strengthen capacity in the Global South, and build out multilateral cooperation. In all these areas, the two want to form a more cohesive united front in work with the tech industry to make sure competing interests of open and secure digital markets are properly balanced.

While a good start, the EU and US should deepen collaboration to share specific case information, particularly between EU member states and Washington. Particularly helpful would be lines of communication that shared intelligence community information and information up-stream of formal investigations. One means of facilitating this might be a joint EU-NATO unit to enable intelligence-sharing on individual export and investment cases.

Other areas of mid-term TTC work could also include conversations around research protection, S&T visas that create a Euro-Atlantic Schengen for top technology research, and even outbound investment screening from the EU and US. The latter can lead to capture if, say, investment in China or Russia leads to those countries attempting to coerce technology companies to influence policy within the transatlantic space. One just has to look at Russia’s attempt to strongarm YouTube to reinstate RT Deutsch to know that the potential for authoritarian capture is real.

Possibilities in the Global Rule Book, AI and Data Governance

On data governance and platform regulation, the two sides are converging in areas of illegal content, disinformation, and transparency. The White House seems intrigued by the EU’s Code of Conduct on Hate Speech and Code of Practice on Disinformation – two instruments in the European Democracy Action Plan that can be adopted voluntarily by platforms. It is imaginable that the White House could issue executive orders that mirror this language and give platforms like Facebook, Google, and Twitter the option of binding themselves to American rules. These could then be instrumentalized by the Digital Services Act once it is in force. Moreover, the two sides agree about the importance of Big Tech sharing data with academics to provide transparency and audit practices of potential algorithmic manipulation of users.

The two sides focused greatly on AI as a field of new principles, standards, and certification. Both support a “risk-based approach” – the philosophical hallmark of the EU’s AI Act—as the basis for AI regulation. Both came together on the dangers of AI-driven social scoring and close ranks on AI principles in the Global Partnership on AI (GPAI) and the OECD. The two also are wiring deeper cooperation between the NIST and standard-setting bodies in Europe to tackle cybersecurity certification and information sharing. Finally, they are starting to address the destabilizing effects of AI-driven automation on the Euro-Atlantic workforce, small businesses, and disadvantaged communities.

Nevertheless, this area has the most potential for improvement—particularly given the over-the-horizon challenges in data geopolitics. This could be particularly important in next frontier areas of regulation, i.e., industrial data and cloud computing. The US and EU should work to avoid a blanket imposition of data localization that could slide into digital autarky. Major powers carving up data jurisdictions. The US CLOUD Act has been cited as giving US law enforcement reach beyond its border. China’s Data Security laws have broad conditions for extraterritorial access to systems and data operating outside China. Already Beijing is defining this “important data” as a strategic asset with worrying industrial data localization implications. Even as it expresses indignation about territorial overreach, the EU is debating its own e-evidence legislation that would have the same effect of creating para-territorial data sovereignty and has plans to roll out new cloud, industrial rules and quantum computing in the near future.

Framing the TTC

The European Commission has made great pains to define the four corners of negotiation within the TTC—what it is and what it’s not, best described in the four “nos.” First, the TTC is not a zombie TTIP. The transatlantic free trade agreement talks brought up major points of contention on issues like agriculture, investment dispute settlement, and procurement that neither side is eager to revisit, especially in this moment of de-globalization. Second, the TTC is not an anti-China tech alliance. The EU—most importantly Germany— has important equities in China. Rather than force the China issue, Brussels and Washington want to define the kind of open, democratic, human-rights-based tech governance they want to forge. Third, the TTC is not the vehicle for negotiations of a data protection agreement—a so-called Privacy Shield 2.0—between the EU and US. Following the June 2020 European Court of Justice ruling in Schrems II, the commission is dead set on a durable solution to the free flow of personal data to the US that meets GDPR standards and can withstand court scrutiny.

Finally, the TTC will not mess with live platform intra-European regulation negotiations—like the Digital Services Act, Data Governance Act, and the Digital Markets Act—which are currently under negotiation between EU member states and the European Parliament. The Digital Market Act, in particular, has been a thorn in the side of American Big Tech, which loathes what it sees as discriminatory treatment of US companies and limitations on data usage across integrated lines of service. Add to that the fact that the US is holding 232 tariffs on EU aluminum and steel in a separate track and there are the makings of a number of ostensible red lines.

Twin Dangers: The Buy-In Conundrum and the Sell-Out Conspiracy

In fact, the EU-US tech partnership faces two dangers, either of which could ultimately derail the nascent Euro-Atlantic tech alliance.

For one, there is a growing perception in Brussels that the US is attempting to build a hub-and-spoke system in its techno-alliance structure. The Quad—a cooperation between the United States, Japan, Australia, and India—is increasingly seen in Washington as the primary center of gravity for its geo-tech containment strategy of China. Not only did the Quad summit on September 24 establish principles on tech design governance and use. The Quad Draft on semiconductor supply chains, 5G equipment rhymes with the Pittsburgh agenda. In many ways, the Quad in the Pacific and TTC in the Atlantic are complementary democratic tech alliances. But there is a glistening romanticism to the Biden administration’s approach to the Quad absent from its engagement with Europe. If the US attempts to hoist Quad agreements onto the EU as a “second order” partnership, it could ultimately backfire severely.

Perhaps the feeling is mutual. Despite Brussels’ creative efforts to prepare TTC deliverables, there are lingering doubts about whether member states will buy in. What’s more, the US’ consultation missteps have strengthened the hand of the EU’s strategic autonomy crowd. France’s justifiable anger toward Australia’s abrupt cancellation of the €52 billion submarine deal after the announcement of the Australian-British-US AUKUS alliance led to its leadership grasping for consequences. Ultimately, French rage at the AUKUS deal ricocheted off the TTC as Paris tried frantically to postpone the Pittsburgh meeting. French European Commissioner Thierry Breton travelled to Washington proclaiming the need to “pause and reset” the transatlantic relationship, a clear signal that the TTC should be put on ice.

The bank shot off the commission’s diligent work to get a framework on digital technology largely drafted on European terms has left the nascent tech alliance somewhat bloodied. More worryingly, Berlin tacitly supported Paris in its efforts to derail the TTC. But that does not mean that France and Germany see eye-to-eye on tech foreign policy outcomes. Germany backs open RAN, investing €2 billion in R&D to democratize the telco network equipment market. The same cannot be said of France and the European Commission, who see the 5G choke point held by European champions Ericsson and Nokia as a strategic strength. A French hub for a Euro-Atlantic semiconductor ecosystem might awaken the jealousies of other member states, particularly Germany, which sees chip fabrication in “Silicon Saxony” as a potential future anchor for its national mobility and robotics production base. Other frictions lie beneath the surface as well.

Without the full backing and consensus of France and Germany—the undisputed architects of the EU’s quest for technological sovereignty—the commission cannot have standing to negotiate peer-to-peer with the United States on a future tech international order. This has not gone unnoticed in Washington.

And, of course, there is a second danger. American Big Tech is primarily interested in Privacy Shield negotiations and the EU’s live regulation drafts (especially the Digital Markets Act). It is asking what the point of this dialogue is if it is not able to solve the increasingly urgent issue of post-Schrems II transatlantic data flows. They point frustratedly at the increasing zeal of European data protection enforcement on US tech companies even as Chinese Big Tech—TikTok, AliExpress, and Tencent-owned Games—spread like ooze across the EU gaining users and market share.

But therein lies the trap. A hidden false narrative could arise that the TTC is the vehicle for untransparent negotiations taking place “behind closed doors” between the commission, the White House, and US Big Tech to water down European standards on data protection, competition, and platform regulation.

This narrative is patently baseless. But this type of conspiratorial thinking could fire the neurons of disparate groups of activists. Should such a narrative metastasize within certain European NGO communities and on social media, it could be a potent mobilizing force. 2015 TTIP protests in Germany brought 150,000 citizens on to the streets. Such a narrative could also be instrumentalized and supported by influence and disinformation operations from China, whose interests clearly lie with seeing the TTC fail. In fact, an anti-TTC campaign has the potential to be a very effective disinformation campaign for the Chinese. Without a great deal of outreach by negotiators to stakeholders—particularly the European Parliament, Congress, national parliaments, civil society, and the media—the threat of conspiracy mongering could be a real one.

The Way Forward

Ultimately, defining and meeting a discrete set of strategic—but tangible—deliverables would lend the TTC legitimacy. The waters ahead are choppy. Many open questions remain, including the true level of ambition and the role of legislative bodies like the European Parliament and Congress. Should NATO play a role, especially in information-sharing on export controls and investment screening? How can the two sides knit the TTC together with the Quad to create an open, interoperable, rights-based democratic space for emerging technology? Whether member state buy-in, particularly in France, materializes will be clear by the European TTC in spring 2022. The pieces are all there. But some assembly is still required.

Tyson Barker heads the Technology and Global Affairs Program at the German Council on Foreign Relations (DGAP).

Read more by the author

Tyson Barker

The Systemic Partnership

The upcoming meeting of the US-EU Trade and Technology Council (TTC) near Paris offers the chance to forge a Euro-Atlantic Operating System for democratic technology governance.