The U.S. and Europe are starting a new trade age

"We're not going back": The U.S. and Europe are starting a new trade age.

Because of this significant change, climate and technology will become more linked to trade.

The first pandemic that people can remember has caused global supply lines to be rethought. Climate change projects are now getting massive amounts of money. Artificial intelligence and next-generation 6G communication networks are two new technologies that could change how businesses and governments work.

Underlying it all is growing worried about competition from China and a growing focus in both the EU and the U.S. on supporting domestic businesses instead of promoting global trade.

"This is a different world: climate, non-market economy policies and practises, and supply chain vulnerabilities are at the top of everyone's mind," said Daniel Mullaney, who left this year as the United States long-time top trade negotiator with Europe.

This week, U.S. and EU officials met in Sweden to discuss the dramatic change, which means that problems like climate and technology will become more intertwined with trade. This will make it harder to work together because each side will be competing with old rules.

Mullaney said, "Many different things caused the change over the last ten years, and we're not returning." "It's not like the old government is gone, and now everyone can return to the way things were and breathe a sigh of relief. Even before the last government was in office, things were already changing, even in Europe.

During the Biden era, a new forum was set up to close the gap. The U.S.-EU Trade and Technology Council, which met in Sweden, is taking a more outward-looking approach than past efforts to increase trade between the U.S. and EU, whose 27 member nations negotiate trade as a single bloc. This includes talking more about how the two sides can work together on the standards and rules for technologies and businesses that will be important to economic growth in the future.

On Wednesday, a group of high-level officials finished their fourth TTC meeting in Lule, a small industrial city above the Arctic Circle hub for "green" steelmaking in Europe and home to the data systems of the U.S. tech giant Meta.

Less than ten years ago, the two sides took a completely different approach. With the Transatlantic Trade and Investment Partnership, a standard free trade negotiation started by former President Barack Obama, U.S. and EU business interests were put front and centre. Eventually, these talks came to an end because European leaders were put under a lot of political pressure. This pressure came from a grassroots movement that grew increasingly worried about tighter economic integration with the U.S.

When Donald Trump was president, trade ties hit a low point because the U.S. raised tariffs on steel and aluminium imports, and the other country did the same. In response, the EU put taxes on famous American goods like bourbon and Harley-Davidson motorbikes. Trump also said that he would put high taxes on cars that come from Europe. In the end, the two sides settled on a small set of tariff cuts.

Since free trade talks broke down and Trump's tariff wars got out of hand, there's no political will to solve traditional trade problems. Long-running trade problems include the EU's rules on genetically modified foods and the U.S.'s "Buy American" rules, which make it hard for European companies to bid on government projects.

"We just found a way to live with many of these annoyances," said Hosuk Lee-Makiyama, who runs a Brussels-based think tank called the European Centre for International Political Economy.

Instead of going back to the old way of negotiating tariffs by giving and taking, the Biden government has adopted a "worker-centred" trade policy. Instead of pushing trading partners to adopt digital laws that are more friendly to U.S. tech companies or to open their markets to more U.S. investment, the U.S. is putting a lot of effort into raising foreign labour and environmental standards to level the playing field for U.S. workers. All of this is happening without giving them more access to the lucrative American customer market because they are afraid of the political consequences.

The World Trade Organisation, which should be where new global rules for business in a new age are set, has lost its power. Many people say that the EU and the U.S., two of the organisation's most influential members, are to blame for its failure to stay relevant. The organisation is hard to work with because it is built on consensus, and it has been hard for most of this century to devise a plan for new problems in the global economy, such as sustainability and dealing with China's behaviour.

Hugo Paemen, a former EU ambassador to the U.S., said that the world was happy when China joined the WTO because most people thought China would change. However, China changed the WTO to a certain point, not China.

Without a good way to settle trade issues on a global or bilateral level, tensions between the two sides are growing because of new climate policies. EU automakers were upset when they couldn't take advantage of a significant U.S. tax credit for electric cars. Congress made the rule so foreign-made vehicles, batteries, and minerals can't be included unless they come from a free-trade partner. The EU, which does not have a free trade agreement with the U.S., is now seeking a deal that would let European companies get at least some of the tax credit if the car used so-called critical minerals that were mined or processed in the EU and could be used to make batteries.

Secretary of State Antony Blinken, at the last TTC meeting in Sweden this week, talked about how a few hundred kilometres away, the most significant deposit of rare earth metals in Europe, had just been found.

He said, "It shows that Sweden has a bright future as a mining country, which is becoming more and more important for the green transition."

In the same way, U.S. businesses are worried about the EU's Carbon Border Adjustment Mechanism. The move lets the bloc put a fee on products from countries that don't charge the same amount for carbon as European countries; this levels the playing field.

There is still a lot of doubt about whether the TTC will do anything to solve these problems or stop future fights.

"You have to cook with what you have, which is TTC. And they're doing their best to deal with it. "But it's not much," said Cecilia Malmstrom, the European Trade Commissioner and now a senior fellow at the Peterson Institute for International Economics.

Transatlantic leaders will have to figure out how to make the old trade model work with the world's new problems and new ideas about globalisation in the future.