What’s Next for EU-US Relations?

Tuesday 26 May, 2020
Photo Credit Joshua Hohne and Lukas

By Oliver Drewes, senior public affairs strategist in Brussels, and James Meszaros, executive vice president, international, in Washington

The European Union and United States began 2020 with a desire to refresh transatlantic relations and address some of the irritants in the vital commercial relationship that drives growth and investment in both markets. A new EU Commission was looking to advance a more assertive policy agenda on climate, technology and security. Policy in Washington would be driven against the backdrop of a presidential and congressional election year and an increasingly polarized electorate.

As the year began, neither Europe nor America foresaw the impact that the coronavirus outbreak would have on economies, societies and the policy agenda. In the weeks that followed, both Brussels and Washington have had to refocus their attention to address the emergency health impact of the pandemic across their geographies, and now on how to reopen economies and begin to recover from the steep decline in growth, investment and employment.

We explore the current state of key policy issues and what to watch for next through perspectives from both Brussels and Washington.

What challenges face Brussels and Washington in reopening the economy and promoting growth, investment and employment?

OLIVER: The unexpected pandemic led to chaotic disruptions in the internal market and poorly orchestrated reactions by Member States. Brussels seemed to have lost control. Suspicion deepened between northern and southern Member States around who would pay for recovery, causing a deep rift across Europe. The European Commission is trying to revive the initiative by proposing a “Marshall-plan” for growth. Brussels is also loosening rules for state aid and stimulus for large sectors of the economy, including tourism. Critics fear Brussels will concentrate on short-term measures to save jobs in the interim while losing the larger picture of sustainable growth and economic soundness. Loosening the rules-based, fair-play principles of the internal market, with the European Commission as referee, could lead to significant disruptions for investors and companies. Wealthy EU countries are expected to bail-out their state-linked industries, while others could become collateral damage.

JAMES: While US economic growth may begin to recover in the second half of the year, unemployment and business failures will remain high. To date, Congress has spent over $3 trillion in emergency relief and stimulus, while the Federal Reserve has injected more than $3 trillion to support credit and liquidity. Congress will need to consider additional stimulus measures — including aid to state and local governments, health systems and direct payments to individuals and businesses — but Democrats and Republicans disagree on spending priorities, requiring Senate and House leaders to pull together the compromises necessary to pass legislation. The stakes are high for the economy, but also for political messaging ahead of November’s election.

What lies ahead for data privacy?

OLIVER: For Europeans, data protection and privacy laws are enshrined in the General Data Protection Regulation (GDPR) or ePrivacy directive. Europeans want to keep their data protected and do not believe privacy is functioning well in the US, but COVID-19 might change the view of Brussels on data privacy. Many argue that EU data protection has to accommodate contract tracing systems to prevent further spread of the pandemic. Emerging from lockdown with the help of tracking systems might be more compelling than sticking to strict privacy laws. Europeans want their lives back. This development offers a new opportunity for debate with the United States.

JAMES: There is renewed urgency for Congress to pass a national data privacy law as personal health data takes center stage in the privacy debate. Companies are concerned with having to comply with a myriad of different state regulations and mandates in addition to the GDPR. Looking ahead, governments and employers may deploy new digital surveillance technologies to track and trace COVID-19 cases and social mobility patterns, heightening people’s concern about how much of their personal information is being collected and shared. Public opinion polls show that while Americans have mixed views on using contract tracing tools to track COVID-19 cases, they oppose these tools to monitor their social movements.

Will the COVID-19 pandemic and economic recess shift attention away from addressing climate change?

OLIVER: Before the outbreak, Brussels was focused on enacting a new Green Deal agenda to promote sustainable growth and mitigate climate change. Critics fear the EU will now derail its own Green Deal objectives. Even if Commission President von der Leyen and others say the recovery will be green and in line with environmental objectives, large industry sectors such as airlines are lining-up for aid with “no green strings attached.” Many Member States argue the economy should come first and there appears to be a shift in the Commission away from green objectives in favour of “economic firefighting activities.” It is too early to know if the balance will be in favour of green objectives, but for some, climate was always a programme for affluent people in wealthier countries. This is a critical moment for business sectors that invested substantially in green solutions and are relying on green legislative measures to materialise.

JAMES: Climate politics remains highly polarized in Washington. The Trump administration has sought to lessen environmental regulations on businesses and farmers, as well as withdrawing the United States out of the 2016 Paris Climate Agreement. States and private companies have acted where national leadership has been lacking and advocacy groups continue to press for a shift to clean energy technologies. With Washington, the states and companies focused on economic recovery, there is not likely to be any significant climate initiatives this year. If elected in November, Democrats are promising a significant reprioritization and investment in national climate policy in 2021.

Can there be any progress this year on EU-US trade issues?

OLIVER: Brussels is pleading for multilateralism through rules-based international organisations. It is openly expressed that the US is not on this track. For example, the US did not participate in the COVID-19 donor conference organised by the European Commission and other nations. However, the pandemic creates a new opportunity for Brussels to seek a “transatlantic agenda for recovery” with Washington. Phil Hogan, European Commissioner for Trade, has proposed to revive negotiations on EU-US trade disputes, proposing an agenda with everything on the table. Brussels believes the pandemic is a chance to work together and could be the beginning of a new chapter in EU-US relations.

JAMES: Bilateral trade relations have deteriorated as the US has sought to reduce its large trade deficit with Europe and other global markets. While President Trump has dialed down his threat on tariffs on automotive imports, steel and aluminum tariffs remain in place and the 20-year Boeing-Airbus subsidy dispute needs to be resolved. The US continues to insist that food and agriculture be part of any bilateral trade talks. Many US companies are focused on implementing the US-Mexico-Canada trade agreement, which enters into force on July 1, avoiding any new trade disputes with China and watching if bilateral trade talks with the UK move ahead while also watching UK-EU trade negotiations.

Can Europe and the United States align around a common strategy toward China?

OLIVER: Both anti-China and anti-US rhetoric are on the rise across Europe. While China is admired for high productivity, there are doubts about its compatibly with European values. The pandemic has increased suspicion that China is openly bullying EU media critical of China’s management of the pandemic. The Chinese mission in Brussels was engaged in softening the coronavirus disinformation report of the EU in favour of China.

Many Europeans feel disconnected from the United States. A Pew Research study says only 39 percent of Germans have a positive image of the United States. Grassroot conspiracy theories have evolved about “evil” coming out the US, with real political impact. Many in Europe believe Bill Gates invented COVID-19 to become even wealthier and a political party is under formation in Germany to stop him. Mathias Döpfner, the CEO of Axel Springer media group, authored an article in Die Welt saying the pandemic makes it clear that Europe is running out of time to choose between the US and China. In his view, America’s democratic values compared to the authoritarian values of China make the choice clear. There is a desire in Brussels for the US and the EU to intensively work together as like-minded partners. The common goal should be to support the multilateral global governance system based on the rule of law and protection of intellectual property rights. Brussels believes this model works best if it is extended to any nation playing by the rules, including China.

JAMES: Anti-China rhetoric is on the rise in the United States. Business leaders and diplomats are concerned that symbolic or substantive measures may be taken in either Beijing or Washington that would deteriorate the relationship further. The Trump administration blames China for obscuring the origin of the coronavirus and not acting fast enough to contain it. Democrats and Republicans will debate and disagree on how to hold China accountable. There will be pressure on US companies to begin re-shoring critical supply chains, especially for essential health equipment and drugs, and new restrictions on tech exports. Europe and America share many of the same challenges in China and working together could induce change and promote common goals such as protecting intellectual property, opening markets for investment, promoting structural reforms and improving governance and human rights in China. Even as Brussels and Washington sort through bilateral irritants, this is an area for ongoing dialogue and alignment.

Oliver Drewes is Senior Executive Director for Public Affairs at Weber Shandwick in Brussels. He previously spent more than 15 years as a spokesperson at the European Commission, with a focus on maritime affairs, financial services, agriculture and rural development. James Meszaros is Executive Vice President for International Public Affairs at Weber Shandwick in Washington, with a focus on trade, cross-border investment, climate and global development issues.