US Trade Representative Advocates Closer US–EU Trade Ties

U.S. Trade Representative Katherine Tai speaks during a press conference at the Foreign Correspondents' Club of Japan in Tokyo on April 20, 2023. (Kazuhiro Nogi/AFP via Getty Images)

In a message aimed squarely at China, U.S. Trade Representative Katherine Tai emphasized the importance of deepening economic ties between the United States and the European Union, stressing the need to work together to adjust to the shifting geopolitical landscape shaped by China’s growing global influence.

“Basing that community on a community of democracies is really important,” she said.

Reflecting on China’s past role as a cooperative partner, Ms. Tai remarked that “the China that we’re dealing with now, the PRC [People’s Republic of China], is not a democracy; it’s not a capitalist, market-based economy.”

Given China’s substantial global presence, the United States and its allies must reconsider how to “coexist” with China and “adapt” to the current global economy, she said.

“We need to evolve the way we do trade,” Ms. Tai warned. “You can’t do that by yourself.”

The trade representative addressed international trade representatives at an event hosted by the Atlantic Council on June 3 that commemorated the 80th anniversary of the Bretton Woods system. This monetary management arrangement, established after the 1944 Bretton Woods Conference involving 44 countries, set the rules for commercial relations among the United States, Canada, Western European countries, Australia, and others.

The Bretton Woods Agreement marked the first fully negotiated monetary order aimed at governing monetary relations among independent states. It promoted greater cooperation to prevent competitive devaluations. The creation of the International Monetary Fund, which is tasked with monitoring exchange rates and providing reserve currencies to nations facing balance of payments deficits, was a key outcome.

China Factor

Ms. Tai emphasized the need for the United States to strengthen trans-Atlantic commerce and resist China’s nonmarket economic actions.

“As history unfolds, everything is connected,” she said. “That economics is connected to politics, which is connected to national security, which is connected to the relationships between countries and to the relationships with the people, citizens and their people, and to their governments.”

In that “world order,” there is a sense of anxiety and insecurity in every economy, according to Ms. Tai.

Take, for example, the global supply chain, about which she noted: “How incredibly fragile we now realize they are; how much concentration is reflected on certain supply chains in terms of single source, single country, and single region supply.”

Consequently, Ms. Tai said, the dominance of certain regions and countries over entire sectors or specific parts of the supply chain is fueling geopolitical tensions.

She noted that while globalization has brought significant efficiencies, it has also incurred costs, with the greatest drawback being the insecurity in the global supply chain.

Another cost, Ms. Tai noted, is the intense geopolitical competition that results from “pitting our workers against each other, creating a zero-sum struggle for economic and industrial growth opportunities.”

To mitigate these costs, she emphasized that leaders in the United States and the EU must adopt a “holistic” approach to trade. This approach should integrate domestic and international needs alongside economic and security priorities. Such a comprehensive strategy, she explained, is essential for establishing “another new world order.”

US–Europe: A Unifying Force

According to the U.S. trade representative, there’s a growing acknowledgment that the international financial and trading system must adapt to the modern global economy. The way it adapts and maintains its principles will be critical. Historically, strong U.S.–European trade relations have fostered prosperity and security, serving as a stabilizing force.

However, today, both sides of the Atlantic face new geopolitical and geoeconomic challenges reminiscent of the post-war era, prompting debates about the future of this order.

These strategic challenges have ignited new actions focused on economic security, such as export controls, investment screening, and, recently, Washington’s increased tariffs on Chinese electric vehicles, semiconductors, critical minerals, batteries, and more.

Trans-Atlantic coordination on these issues will be essential to building resilience against responses from Beijing and other challengers, as well as revitalizing and restoring the global economic system.

Technological Change

Ms. Tai also noted that the rapid pace of technological advancements, particularly in data-related fields, is transforming trade, and she recommended taking a moment to reassess and foster collaboration across government departments to effectively address these changes.

“When we’re talking about data, it’s not just about the bits and bytes that help facilitate a traditional goods transaction anymore,” she said. “Data is the game itself.”

Ms. Tai said this shift in data dynamics might necessitate a reconsideration of conventional trade approaches.

“Isn’t it time for us to hit pause on this, come back ... and try to get our arms around what is actually happening here and what is in the public interest?” she asked.

In this process, the Office of the U.S. Trade Representative (USTR) would need to reconnect with decision-makers across various government departments, according to Ms. Tai.

“A USTR-led answer to how we should be regulating tech and data ... is not going to be the right answer,” she cautioned.

“We have got to figure out what works for the United States ... what works for our democracy. It’s a domestic policy issue first before we bring it to the international realm.”