With eight days of glad-handing, photo ops and fanfare, Joe Biden and his team are hoping his trip to Europe will reboot transatlantic relations.
That won’t be easy.
Even though Biden’s election might have swung Washington’s needle closer to the EU playbook, the U.S. and Europe remain split on many policy issues key in Brussels and EU capitals. The two sides are at odds on everything from lingering Trump-era trade tariffs to taxing America’s tech giants to making farming more environmentally sustainable.
Here’s POLITICO’s rundown of the policy disputes that could prove problematic.
1. The tariff trade war
The new president has left much of Donald Trump’s trade policy untouched, including tariffs on steel and a blockade of the World Trade Organization’s court system.
Biden’s drive for a “Buy American” policy, favoring U.S. companies in major public tenders, is one of the reasons Brussels is preparing a new legal tool to ensure reciprocity in big public contracts. After dithering for almost a decade, the EU is finally moving on plans to bolster the EU’s industrial champions that could be harmful for U.S. companies.
Brussels and Washington have agreed to call temporary tariff truces on both steel and aluminum duties and Airbus-Boeing tariffs. But resolving these long-standing trade disputes will be the true test for the renewed transatlantic love declarations.
Washington wants to allow wider production of coronavirus vaccines, unhindered by patent protections | Saul Loeb/AFP via Getty Images2. Waiving vaccine patents
Intellectual property rights are likely off the agenda after the U.S. threw the EU under the bus in May. Washington’s about-turn to support a waiver on patent protections for coronavirus vaccines blindsided many and left the EU scrambling to defend its continued opposition to a similar waiver proposal at the WTO.
The aim of Washington’s plan? To allow wider production of coronavirus vaccines, unhindered by patent protections. The EU argues it won’t work, and that factors such as manufacturing are the limiting factor. But there are cracks in EU solidarity, with Italy and Belgium indicating support for a waiver.
Officially, the EU is standing firm as one of the few WTO participants delaying detailed discussions on the proposal. On Friday, it presented a counter-proposal that sidesteps calls for a waiver in favor of clarifying existing provisions that allow countries to force individual vaccine makers to share patents during health emergencies.
3. Transferring everyone’s data
It’s been almost a year since the EU’s top court annulled a data flows deal with the U.S. called Privacy Shield due to fears of American surveillance practices. It’s the second time Europe’s top judges have killed such an agreement, and the pressure is mounting to get it right this time.
Brussels and Washington don’t see eye-to-eye on how to fix the agreement so that it meets Europe’s high privacy standards, but Biden is keen to use this trip to push for a high-level political agreement with Commission boss Ursula von der Leyen. The goal is to lay the groundwork for a new transatlantic data transfer deal.
The stakes are high. Privacy Shield underpinned billions of dollars in EU-U.S. digital trade, and companies on both sides of the Atlantic have been pushing hard for a replacement agreement for almost a year. Political deal or not, major hurdles remain over possible limits on how U.S. national security agencies can access EU citizens’ data.
4. Trade with China
Nobody mention the China deal.
The EU in December struck an investment deal with Beijing, handing a big reputational win to China just as it dismantled freedoms in Hong Kong, locked up hundreds of thousands of Uyghurs without trial and withheld crucial information on the origins of the coronavirus outbreak.
The timing of the deal was more than awkward for the Biden administration, which was not yet sworn in but broke its silence to warn the EU about its Sino embrace. The deal is now on ice amid objections from the European Parliament. But that doesn’t mean Washington and Brussels are on the same page when it comes to trade with their common rival.
While the U.S. has banned imports of products from the Xinjiang region over slave-labor concerns, the EU has no such restrictions. The U.S. also continues to block reforms to the World Trade Organization that the EU sees as key to tackling Beijing’s state-capitalism model.
Pharmaceutical companies are heavily reliant on U.S. sales to keep the industry healthy | George Frey/Getty Images5. The cost of drugs
The U.S. has frequently complained that Europe pays too little for drugs, leaving pharmaceutical companies heavily reliant on U.S. sales to keep the industry healthy. With the U.S. pharma lobby having the ear of lawmakers, companies have remained sheltered from any effort to standardize drug pricing negotiations on the basis of how much added value new treatments actually provide. So-called health technology assessments have been commonplace in Europe for over two decades and are credited with preventing drug prices from spiraling and keeping health systems affordable.
Biden has promised to tackle drug prices, and progressive Democrats have drafted a bill that would give the federal government the power to negotiate prices over insurance companies — but it’s already facing opposition from the president’s party. A group of House Democrats wants to see more moderate reforms that would preserve America’s “invaluable innovation ecosystem.” The divide could provide drugmakers with their escape from a bill considered by the industry as a worst-case scenario for U.S. drug pricing, and continue to drive a wedge between transatlantic allies.
6. Taxing Big Tech
There’s less than a month to go before negotiators are expected to reach a global deal to revamp the world’s tax regime. After the Biden administration unveiled new proposals — targeting the world’s top 100 companies, and not just Silicon Valley’s biggest names — the mood music changed on getting a deal over the line. Europeans, particularly France, are eager to include all the Big Tech companies, and are willing to reach a compromise with the U.S. on which other companies should also be included in the revamp.
But nothing is certain. U.S. officials released — and quickly postponed — billions of dollars’ worth of retaliatory tariffs on countries, including many in Europe, that had imposed their own national digital services taxes. Those domestic regimes are still in place until a global deal is done.
The European Commission is also about to release its own digital levy that could complicate the final days of negotiations. U.S. lawmakers’ eyes are so fixed on international negotiations for a multinational corporate tax that most have overlooked the digital tax that EU policymakers will separately propose. Brussels insists the EU initiative, expected in July, is no big deal. But among those who have noticed it stateside, there’s concern it could upend a global compromise.
The EU wants to create a global golden standard for safe AI, but the U.S. is unlikely to swallow a rulebook drafted in Brussels | David McNew/AFP via Getty Images7. Getting ahead of artificial intelligence
Europe has been courting the Biden administration since last year when it comes to agreeing on controls on artificial intelligence, but the silence from Washington is starting to get awkward.
The EU wants to create a global golden standard for safe AI. But the U.S., which is home to the world’s biggest AI companies, is unlikely to swallow a global rulebook drafted in Brussels.
According to the Commission’s top digital Commissioner Margrethe Vestager, the EU-U.S. summit will kick start a transatlantic initiative meant to boost tech cooperation, dubbed the Trade and Technology Council. But an “AI Accord,” pitched by Commission President Ursula von der Leyen in December, has yet to elicit an official response from Washington.
There is increasing anxiety on both sides of the Atlantic over what AI technologies can do in the hands of authoritarian states such as China, and the U.S. and EU agree that technologies should be developed based on democratic values. But what that means in practice is unclear. In April, the European Commission proposed the world’s first AI law, to regulate AI uses most likely to harm people. Meanwhile, the U.S. remains loath to regulate its tech giants.
8. A carbon border tax
Washington has made no secret of its disdain for the EU’s carbon trade initiative coming in July.
As POLITICO reported this month, Brussels is prepping a carbon border levy that would put a price on imports of steel, aluminum, cement, fertilizer and electricity, in an effort to prevent its industry — which pays for its emissions under the bloc’s cap-and-trade carbon market — from decamping to laxer global jurisdictions.
The EU hopes its plan will also nudge large emitters to increase their climate protection efforts, as countries with equivalent CO2 prices would be exempt from the levy. But the U.S. — which doesn’t have a federal climate price — already told Europeans it should be a “last resort.”
Taxing U.S. exports could prove contentious even in Europe and fear of retaliation against EU exports has already prompted Germany to pitch a “climate club” open to the U.S. to discuss policies. Yet France, which has been the chief proponent of the carbon border tax proposal, is showing no sign of backing down.
The EU is far readier to take its food production green than the giant monocultures of U.S. agriculture | Scott Olson/Getty Images9. Making agriculture greener
With a small-scale family farming model deeply embedded in Europe’s culture, the EU is far readier to take its food production green than the giant monocultures of U.S. agriculture. That is spooking American policymakers, who have warned that the EU’s plan to transform its food system into a greener model by 2030 would have devastating effects on EU-U.S. trade and even risk a global famine.
There is some surprising room for convergence, however: genetically modified crops. Europe and the U.S. haven’t seen eye to eye for decades, with strong consumer opposition in the EU to what has been termed “Frankenstein foods.”
But now a new battle over genetically altered food, looming in Brussels as part of the European Green Deal, could see policies on either side of the Atlantic converge. With the U.S. Department of Agriculture happy to treat gene-edited crops just like normal crops, the European Commission recently warmed to the idea of regulating gene-edited crops differently from GMOs, thus potentially removing the political stranglehold on new foods.
There are no guarantees: Greenpeace has already termed them “the new GMOs.”
10. Pricing carbon
The U.S. and EU have similar climate goals, and reaching them is going to require a steep decline in carbon emissions. But they differ fundamentally in their approach.
The EU’s key tool for driving down pollution is to price it away. Making polluters pay an ever-increasing cost through the bloc’s Emissions Trading System has saved more than 1 billion tons of CO2 and is driving fossil fuels from the electricity system, and pushing steel-makers and other carbon-heavy industries to clean up their factories. That price began to soar last year, after lawmakers agreed to tighten the EU’s 2030 targets, more than doubling since October.
In the U.S., Congress — largely the Republican camp — has remained implacably opposed to a federal carbon-pricing scheme. That’s despite broad support from many industry and environmental groups. Many states have also embraced a carbon-pricing measure.
But it’s not just Republicans. Joe Manchin, a Democratic senator the Biden administration often relies on to move legislation through the tightly balanced upper house, once literally shot a hole through Barack Obama’s cap and trade bill, in stark contrast to the EU’s climate rhetoric.
11. Nord Stream 2
With Brussels so far unable to find a legal way to kill the Russia-to-Germany undersea natural gas pipeline it dislikes, openly opposed countries like Poland, Latvia, Lithuania and Estonia had hoped U.S. President Joe Biden would kill off the Gazprom-backed project for them.
Those dreams evaporated in late May, when Biden failed to impose sanctions on Nord Stream 2 and publicly gave up on trying to stop construction in the name of saving the U.S.-German relationship. Berlin and Moscow cheered the move.
Ukraine was furious, saying Russian President Vladimir Putin now had a “royal flush” in his hands to negotiate on the conflict in Donbas ahead of the upcoming Biden-Putin summit in Geneva. U.S. lawmakers were also rankled by Biden’s backdown, given the wide bipartisan support for sanctions.
U.S. Secretary of State Antony Blinken on Monday said sanctions on Nord Stream 2 would have created “a poisoned well with one of our closest partners, Germany.”
But while Biden may have pleased Berlin, his reputation as an ally of post-Soviet countries in Europe (as well as a staunch anti-Putin crusader at home) has been seriously dented.
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