Washington and Brussels under the Joe Biden–Ursula von der Leyen presidencies have developed a strong working relationship on trade and industrial policy issues. However, Russia’s invasion of Ukraine; growing consciousness on both sides of the Atlantic of the risks of economic dependencies, especially for high-tech and green industries, on countries like China; and fears about maintaining their industrial competitiveness have also jolted the European Union (EU) and United States into adopting more proactive industrial policies.
Policymakers should take heed that their efforts on both sides of the Atlantic do not pose challenges for transatlantic cooperation. The US Inflation Reduction Act (IRA), as the most potent case, fueled a sense that the United States and the EU might become competitors rather than partners in the green transition. More recently, the EU’s anti-subsidy investigation into Chinese electric vehicles could bring collateral damage to US companies, like Tesla, that manufacture in China.
With the EU and United States still searching for solutions to improve their economic security and resilience, this raises a number of critical questions: What does a values-based industrial and trade policy look like? How should the United States and EU develop mechanisms to address policy differences, avoid or at least manage disputes, and craft real forms of cooperation? How can the United States and EU extend cooperation to other likeminded partners such as the Group of Seven (G7)?
Action will not doom cooperation. The French subsidy scheme on electric vehicles designed squarely with China in mind serves as a basis for a flexible subsidy design, that remains outwardly compatible with the World Trade Organization (WTO), but actually closely aligns with the US approach while not violating the EU’s own trade red lines.
Ahead of the upcoming summit between the United States and the EU in October, the Atlantic Council’s Europe Center launched a working group to examine these questions and propose potential solutions to strengthen and grow the transatlantic economy. The working group conducted interviews with current and former EU and US officials from various offices, agencies, and cabinets to understand attitudes in Washington and Brussels.