Abu-Ghazaleh Shares Insights with Bruce Stokes on US – Europe: Together or Alone

[14-03-2021 11:04 AM]

BY Talal Abu-Ghazaleh

Europe must be cautious as to how it should proceed with its relationship with the US. It must not have false hopes due to the election of the new Biden administration which faces many challenges, mainly how to bring together the various factions of its fragmented electorate.

The America that Biden has inherited must be understood in light of the insurrection in Washington and the slim lead the Democrats achieved, barely gaining control of the US Senate while losing seats in the House of Representatives. Three-quarters of Trump voters believe he won the election with only 15% of Americans thinking that American democracy is working well.

Biden is committed to building transatlantic ties but Europeans must understand that the American public is deeply split and any negotiations between Europe and the US must be designed towards bringing the two sides together.

Europeans are now engaging in a long overdue debate over sovereignty and autonomy. They must assert themselves and put pressure on the United Statas to do what is in their mutual self-interests, but at the same time should not create transatlantic divisions. This was the case in signing the EU-China Comprehensive Agreement on Investment in 2020 which was a dramatic assertion of European sovereignty, but it was an ill-timed first step.

With the new Biden administration, Europeans should lead efforts with the US by leveraging climate action, global economic recovery efforts and by creating a more regulated framework for the digital economy. Trump was quick in taking the US out of the Paris Climate Agreement which Biden will reverse -in fact he did so already- to meet his pledge of zero carbon dioxide emissions by 2050. This on its own requires massive internal change.

Biden has also promised to impose higher fuel efficiency standards, to control methane emissions from fracking and to launch other regulatory initiatives to slow global warming. However, courts can, and they have blocked executive orders and the conservative Supreme Court seems poised to curtailing the executive branch’s regulatory discretion.

Europe must take a leading role in this relationship. It should impose a carbon emissions border adjustment price on products from the United States which would give the Biden administration some much needed leverage with its domestic climate change deniers, who will then have to choose between paying a domestic tax on carbon emissions or alternatively pay Europe.

Since the financial crisis of 2009, the United States has faced its slowest recovery in modern times and the US needs more money to stimulate its economy. For Biden, this means increasing corporate levies and higher income taxes on the rich that will undoubtedly face serious opposition.

As the Biden administration will be focusing efforts on internal fiscal reform, the burden of global economic revival will rest more on European shoulders for which the €750 billion European Union recovery fund was a good first step.

It is clear that the digital economy is the future of the transatlantic marketplace and there is a real need for the EU to start immediate negotiations on a new transatlantic data privacy accord in light of the European Court of Justice’s invalidation of the US-EU privacy shield agreement. Not having such an agreement in place will seriously impede the flow of data between the EU and the United States, and it in turn will negatively affect the digital economy.

The EU has proposed a tougher oversight of technology providers and should push for a joint US-EU review of the technology giants; their practices and policies. It is time that the US and EU forged a strong alliance in this important area rather than each one going down a separate regulatory path.

Developing a healthy digital economy also means that the US and the EU need to resolve their differences with regards to digital taxation to ensure that a robust framework is developed so technology companies pay their fair due of tax. If Washington continues to drag its feet in the ongoing OECD negotiations on this issue, European governments should impose their own digital taxes. This may be the only way to force an American debate about digital companies paying their fair share.
The United States is in much need of a strong partnership and the days of America leading with Europe following are gone. Europe must play the role of the big brother and be courageous enough to step up and lead this partnership for the betterment of both parties.


* Bruce Stokes is the executive director of the Transatlantic Task Force and senior fellow at the German Marshall Fund. He was the director of Global Economic Attitudes at the Pew Research Center in Washington, DC, and is a former international economics columnist for the National Journal, a Washington-based public policy magazine. He is also a former senior fellow at the Council on Foreign Relations.

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