Translatlantic Tools: Harmonizing US and EU Approaches to China
After years of developing their own tools to respond to China, it is time for the US and EU to coordinate their approaches and learn from each other. We identify three policy areas with high crossover potential.
Close cooperation between the United States and Europe is essential if advanced economies are to develop effective responses to the array of challenges presented by China. The transatlantic partners share democratic political systems, open market economies, and a commitment to many of the same values. Washington and Brussels also share concerns about recent developments in China. These include worries about the competitive distortions arising from the role of the state in China’s economy, Beijing’s use of advanced dual-use technologies to repress ethnic minorities and fuel its military, and the spread of authoritarian influence through the Belt and Road (BRI) and other foreign policy initiatives.
Despite the shared concerns, there has been a lack of coordination and cooperation in recent years between the United States and the European Union (EU) (and its member states) when it comes to responding to China’s policies and behaviors. Under the Trump administration, tensions in the transatlantic relationship and differing views about how to address the array of challenges presented by China prevented a common agenda. Although talks took place between the administration and European capitals on issues like investment screening, export controls, and fifth-generation (5G) telecommunications technology, policies evolved mostly in parallel on either side of the Atlantic. This is more problematic than it may have been in decades past. The complexity and systemic nature of competition with China—encompassing trade, technology, security, human rights, climate, and more—makes transatlantic cooperation even more important today.
Washington’s focus on risks to US economic and national security contrasts with an emphasis in Brussels on ensuring reciprocity and leveling the economic playing field. This has yielded two distinct policy approaches with some overlap, but also many differences. The EU is devising complex regulatory instruments to limit the activities of subsidized foreign firms in the EU market, ensure reciprocity in public tenders, and compel corporations to vet their supply chains for environmental harm and human-rights abuses. No similar measures are currently being pursued in Washington. The United States, by contrast, has developed an array of China-related tools that don’t exist in Europe. The Foreign Investment Risk Review Modernization Act (FIRRMA) and Export Control Reform Act (ECRA) of 2018 give the US government far-reaching powers when it comes to investment screening and export controls. Washington has also developed innovative approaches to counter the BRI, and introduced outward financial-investment bans in relation to Chinese firms with military links.
These distinct policy approaches are partly a reflection of the differences in how Washington and Brussels perceive the China challenge. Differences in legal systems and political cultures also make it difficult (or impossible) to introduce rules and regulations that have been implemented on one side of the Atlantic on the other side. But, with the transatlantic relationship back on a better footing under the Biden administration, new structures for transatlantic dialogue being put in place, and a greater focus on the Indo-Pacific in both Washington and Brussels, there is now an opportunity for the United States and Europe to learn from each other and harmonize some of their China-related efforts. The United States can learn from a rules-based, actor-agnostic EU approach that does not define every challenge as a threat to national security. The EU and its member states, by contrast, must learn to be nimbler, adapting their thinking and processes to the new geopolitical reality of systemic competition.
Aligning approaches is important for several reasons. It can close loopholes in defensive mechanisms, reduce the risk of subsidies on both sides of the Atlantic nullifying each other, and limit the burden on firms from complying with two sets of regulations. Alignment also reduces the risk of conflicts in the transatlantic relationship because of diverging, or even competing, approaches. Ultimately, a coordinated approach can lead to a more constructive relationship with China—one that is based on consensus and is less prone to reactive or excessive measures.
To facilitate the transatlantic discussion, this Rhodium Group policy brief for the Atlantic Council takes a granular look at the full range of autonomous policy tools that have been developed in the United States and Europe over the past half decade (Section 2). Among these tools, it identifies three policy areas where the crossover potential is high (Section 3). These are policy areas that have not yet been given top priority under the EU-US Trade and Technology Council (TTC). For each, the paper describes EU and US approaches to date, presents the case for greater transatlantic coordination, outlines possible concrete next steps, maps out barriers to greater harmonization, and proposes avenues for overcoming them. It then offers concluding thoughts (Section 4).