Transatlantic Council plans coercive economic measures against China, following successful coordination of the Western sanctions against Russia. EU prepares Economic Security Strategy.

The EU-U.S. Trade and Technology Council (TTC), which meets today, plans new coercive economic measures against China following the successful coordination of Western sanctions against Russia, according to reports on draft conclusions of the transatlantic summit. After the start of the Ukraine war, the TTC – that was founded in 2021 to repair the transatlantic rifts on economic issues, which had emerged during the Trump era – morphed into a central body for coordinating Western coercive measures against Russia. It will now additionally coordinate controls of exports and investments relating to China within the United States and the EU. US Secretary of State Antony Blinken is also expected to attend the meeting. Meanwhile, the EU is elaborating an Economic Security Strategy to facilitate economic measures against China. Commission President Ursula von der Leyen has recently called for banning investments in the People’s Republic by European companies, whenever deemed necessary. Experts are promoting the creation of a “geo-economic NATO”.
“G2 for Global Tech Governance”
The EU-U.S. Trade and Technology Council (TTC) has its origins in the EU’s initiative in late 2020 – after Joe Biden won the US presidential elections – to establish a transatlantic body aimed at repairing economic rifts from the Trump era and creating the basis for enhanced transatlantic economic cooperation. In addition to consultations on the respective energy transition, it was also planned to jointly determine technological standards, so as to perform as a powerful high-tech-bloc in the global economy – there was talk of a “Euro-Atlantic Tech Alliance” or a “hidden G2” for global “tech governance.”[1] Restraining China’s industry was the driving motive from the very outset. Jake Sullivan, for example, US President Joe Biden’s national security advisor, declared that Biden and his EU counterparts “will focus on aligning our approaches to trade and technology so that democracies and not anyone else, not China or other autocracies, are writing the rules for trade and technology for the 21st century.” [2] The establishment of the TTC was decided on June 15, 2021 at the EU-US Summit in Brussels and the inaugural meeting was held on September 29, 2021 in Pittsburgh.

Test Case Russia
So far, TTC has had a mixed record. There has been no real abatement, let alone repairing of transatlantic economic rifts. The Inflation Reduction Act (IRA) is the best example, an investment program of hundreds of billions of US dollars, with which the Biden administration is luring strategically important high-tech investments from Europe to the United States, thus undermining Germany’s and the EU’s efforts to achieve greater economic autonomy (german-foreign-policy.com reported.[3]). Since Russia’s intervention in Ukraine, however, – according to an Atlantic Council analysis – the TTC became the decisive “transatlantic forum for coordinating export controls on Russia,” or for coordinating details of the sanctions against Russia imposed on both sides of the Atlantic.[4] “The TTC has played a key role in creating a united front against Russia,” Sweden’s Minister for Foreign Affairs Tobias Billström declared,[5] It also has been a “test case,” concludes European Trade Commissioner Valdis Dombrovskis. Whether close cooperation can also be achieved against other states remains to be seen, according to the Washington-based Center for Strategic and International Studies (CSIS).[6]

Against China
An expansion of the TTC activities against China is on the agenda of the fourth meeting of that body in Luleá in northern Sweden, beginning today, Tuesday, and due to end tomorrow. While it also includes measures to reinforce the West in the global competition, such as steps to be jointly taken to develop the next 6G mobile communications standards, as well as promote regulations for artificial intelligence (AI). However, the focus of the TTC meeting will be on measures to damage China. For example, it was reported that they plan to coordinate their respective export controls more closely.[7] In effect, this amounts to the EU adopting US sanctions regulations. Besides, the TTC aims to place tight regulations on western investments in the People’s Republic (Outbound Investment Screening). It must be prevented “that capital, expertise and our enterprises’ knowhow support the technological progress of our strategic rivals in such a way” that is detrimental to our own security, according to a draft of the final document.[8] In effect, this is intended to prohibit western enterprises’ investments in China that would allow Beijing a more comprehensive technological headway.

EU Economic Security Strategy
The EU leans toward this objective, independently of the TTC. The EU Commission is currently elaborating a paper under the name Economic Security Strategy, which is expressly intended to ensure that state-of-the-art technologies – even the so-called dual use-technologies, which can have both civilian and military applications – “do not end up in the wrong hands,” as European Trade Commissioner Valdis Dombrovskis declared.[9] A while ago, EU Commission President Ursula von der Leyen had also made a plea for an outbound Investment screening, as a means toward this goal.[10] The measure was rejected by a large number of EU countries, including Germany, whose ministry of the economy clearly opposed it. Germany’s Minister of the Economy, Robert Habeck, provoked great surprise, when, on May 10, he abruptly changed his mind and declared his openness to controls on German foreign investments.[11] Dombrovskis considers that it will not be easy to establish EU-wide uniform export and investment controls, because the member countries are very covetous of their sovereign rights and not ceding them to Brussels. However, there has been a test case: the introduction of joint coercive measures against Russia, has “actually worked quite well.”[12]

A “Geo-Economic NATO”
Regarding such coercive measures, foreign policy experts are already discussing the creation of a “geo-economic NATO.” For example, in a recent paper of the European Council on Foreign Relations (ECFR), a Berlin-based foreign policy think tank, they write, “in the century of competition between China and the West, the geo-economic realm will likely become the central front.”[13] The authors of the paper argue in favor of establishing a joint forum for decision making on possible coercive measures – a “geo-economic NATO.” This would be preferable to the current situation, where in effect, the USA decides on the sanctions and investment controls, and then forces the European countries to accept them. If decisions are taken in alliance, resulting from discussions, it would be more effective, according to ECFR – particularly vis à vis China.

[1] Tyson Barker: TTC Lift-off: The Euro-Atlantic Tech Alliance Takes Shape. ip-quarterly.com 30.09.2021. See also The Euro-Atlantic Tech Alliance.

[2] Mark Scott, Jacopo Barigazzi: US and Europe to forge tech alliance amid China’s rise. politico.eu 09.06.2021. See also Im Streit vereint.

[3] See also In “Systemic Competition” with the USA.

[4] Here’s what to expect on China, AI, green energy, and more when EU and US officials meet in Sweden. atlanticcouncil.org 26.05.2023.

[5] Sweden to host Trade and Technology Council meeting. europeaninterest.eu 23.05.2023.

[6] William Alan Reinsch, Emily Benson: Assessing Progress within the TTC. csis.org 18.05.2022.

[7] Philip Blenkinsop: EU and US to pledge joint action over China concerns. swissinfo.ch 13.05.2023.

[8] TTC: EU und USA wollen bei Auslandsinvestitionen genauer hinsehen. table.media 26.05.2023.

[9] Philip Blenkinsop: EU faces test to get members to cede power on export controls. reuters.com 26.05.2023.

[10] See also In die Sanktionsspirale.

[11] Martin Greive, Dana Heide, Moritz Koch, Julian Olk, Annett Meiritz: Habeck will China-Geschäfte deutscher Unternehmen kontrollieren. handelsblatt.com 10.05.2023.

[12] Philip Blenkinsop: EU faces test to get members to cede power on export controls. reuters.com 26.05.2023.

[13] Jeremy Shapiro, Jana Puglierin: The art of vassalisation: How Russia’s war on Ukraine has transformed transatlantic relations. European Council on Foreign Relations: Policy Brief. April 2023. See also Die Vasallisierung Europas.