Europe

William Alan Reinsch

Source Link

This week’s topic is Europe, so those of you entirely fixated on China can take a break and go read something else. Don’t go away for good, though. China will be back in this column soon. Europe, however, is also an interesting topic because it has long been a case where we seem to be able to get the big things right but have much less luck with the small things, even when they turn out to be important.

Geopolitically, countries on both sides of the Atlantic are often in alignment. There are periodic flares of uncooperative activity and occasional grumbling on both sides, usually about lack of consultation on some important decision, but for the most part, the United States, EU member states, the United Kingdom and the various unaffiliated states like Norway share a common view about the world and the challenges we collectively face, and, more often than not, agree on what to do about them. The most obvious and recent case in point is Russia’s invasion of Ukraine, where Europe, the United States and Canada and others) rallied to take a common approach in resisting Russia and imposing severe sanctions. Cynics might say that one was easy for Europe, since it’s next door, and they would point to the parallel debate over aligning our China policies as a sign that the relationship is more complicated than we would like. Even there, however, I see the various viewpoints slowly converging on the tougher line the United States has been advocating.

We have had less luck on the smaller things, particularly trade issues, where the United States and the European Union have been at loggerheads on everything from chickens to cheese to chips (the ones you put in computers) for at least 40 years. While each issue has its own unique aspects, there is one theme that runs through all of them—a fundamentally different approach to regulation. To oversimplify, the U.S. approach tends to be descriptive and ex post. We define a standard or goal and leave it to the private sector to figure out how to comply, with the threat of punishment hanging over their heads if they do not. This has not been our approach in every case, and there are signs now of greater interest in European methods, but in general that has been the U.S. approach.

The EU approach, in contrast, has tended to be prescriptive and ex ante. Regulations provide detailed instructions in order to preempt behavior deemed unacceptable and thereby avoid lengthy after-the-fact enforcement actions. The EU goal is preventing harm rather than punishing it after it has occurred, and you can see that in their continuing use of the precautionary principle. That began in the agriculture sector and has been spreading to other parts of the European economy. It is basically the idea that if you can’t prove something is safe, you can’t proceed with it. (The United States, in contrast, tends to permit activities unless and until they are proven unsafe.) The classic case illustrating the difference is the decades-long battle over genetically modified organisms (GMOs), which the European Union has resisted permitting in its territory despite losing at the World Trade Organization (WTO) on the issue, while the United States has argued there is no evidence showing them to be unsafe.

I am going to avoid a discussion of which philosophy is “right” or “better.” Both have costs and benefits. I would say, though, that the U.S. approach has led to a more innovative and dynamic economy. Whether it is also a safer one is for you to judge. The important issue is that these are very different approaches, and they are deeply embedded in our societies, which has made reaching agreement on trade disputes very difficult. Even when we agree on the goal, such as safer cars, reducing carbon emissions, or safer drugs, we find it difficult to agree on how to get there or even acknowledge that both ways of getting there might be legitimate. One of the (few) specific outcomes of the May Trade and Technology Council meeting in Sweden was a mutual recognition agreement on veterinary medicines. This is welcome news but very small cheese—we have a long way to go if we are to reconcile our many different practices.

These differences have lately become a divisive issue with respect to digital trade, where the European Union has exacerbated trade tensions by applying its restrictive approach in a way that overtly discriminates against large U.S. digital service providers like Google, Amazon, Apple, and Meta. CSIS has published multiple papers detailing the effects of the EU Digital Services Act and Digital Markets Act, as well as the implications of EU competition policy, explaining why this is bad policy that harms European consumers as much as it harms U.S. companies, and I won’t repeat those arguments here. During the European Union’s recent trade policy review at the WTO, Ambassador Maria Pagan complained—again—about the European Union’s GMO approval process, but I was disappointed to see that she failed to mention digital issues, aside from the European Union’s discriminatory cloud services procurement measures. That is perhaps a reflection of the ambivalence the Biden administration has on digital regulation. It appears that some in the administration and some in the Congress believe the European Union’s approach is better, notwithstanding the harm it does to U.S. tech companies. The development of a national approach to tech regulation is overdue in the United States, and Congress is largely to blame for that failure, but ceding leadership on tech regulation to the European Union is an enormous mistake. It is clear the European Union’s intent is to promote EU companies, real or potential, at the expense of ours, and at the expense of their own consumers. For the reasons outlined above, I am pessimistic about our collective ability to resolve these differences, but at the very least we should not hand the baton to the European Commission under the misguided impression they are acting in our interest. That brings to mind the classic quote from Pogo: “We have met the enemy, and he is us.”

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).