The Trade and Technology Council: EU soft power at its finest

Mădălin Iamandei
Published on: 28th August 2023

The Trade and Technology Council: EU soft power at its finest

Seen at first as a compromise deal instead of the defunct trade agreement between the EU and USⁱ, and after a rough start in 2021, the EU-US Trade and Technology Council proved to be a valuable instrument of EU soft power in shaping a working and valid relationship with the US. The next European TTC, this time with India is based on shared goals, mostly on the need to contain China and its rise in the technology field.

As a precursor and a stimulant to the trade agreement with Mercosur, complementing its strategic goals, the EU should also here look for a TTC.

Background and scope

The TTC serves as a forum for the EU and the US to coordinate approaches to address key trade and technology issues, and to deepen transatlantic cooperation in this realm based on shared democratic values. The inaugural meeting of the TTC took place in Pittsburgh on 29 September 2021. Following this meeting, 10 working groups were set up covering issues such as technology standards, artificial intelligence, semiconductors, export controls and global trade challenges. The working groups translate political decisions into specific deliverables, coordinate technical work and report to the political level. A second ministerial meeting took place in Paris on 16 May 2022 and a third ministerial one in College Park, Maryland, in December 2022.

After some European concerns (to be read “mostly French”) regarding the Inflation Reduction Actⁱⁱ and its effects on the transatlantic trade, the fourth meeting of the EU-US TTC, held on 31st May 2023 in Luleå, Sweden, was a success, not least due to joint milestones on strategic issues such as AI and semi-conductors, but even more notably e-mobility and the common approach to the MCS. The megawatt charging system designed for the charging of heavy-duty vehicles, a main achievement of CharIN e.V.1 which developed the parameters thereof, was showcased to various high-level decision-makers2. Setting MCS as a common transatlantic standard facilitates transatlantic trade and investment by reducing manufacturing and deployment costsⁱⁱⁱ.

India and Beyond: Extending Influence through Cooperation

Beyond transatlantic ties, the TTC's scope extends to engaging with other key players, and EU was keen on duplicating this success with India, with the launch of the EU-India TTC in February.

India's burgeoning tech sector and strategic position make it a crucial partner for the EU in shaping the future of technology and trade. The cooperation between the two is the mirror effect from Sino-Russian alignment; both seeking to decrease their dependence on China and Russia.

The latest TTC proves that the EU is arming itself with a toolbox to tackle economic distortions and security disruptions to supply chains and strategic technologies from China, but not only^iv. Collaborative efforts through the TTC can serve as a means to align regulatory frameworks, facilitate investment, and promote responsible tech innovation. This not only enhances the EU's geopolitical influence but also reinforces its commitment to a rules-based international order.

Case for an EU-Mercosur TTC

Following the successful establishment of the TTC with US and India, a compelling case emerges for extending the TTC framework to encompass the Mercosur states. By complementing the desired EU-Mercosur trade agreement, such a council would not only foster economic growth but also promote technological collaboration and geopolitical cohesion between these regions.

In recent years, China has become a major force in South America as it invests billions in infrastructure through its “Belt and Road Initiative” – a global infrastructure development project through which China hopes to increase its influence around the world. China is the largest trading partner of Mercosur states; particularly Brazil.

A major initial impetus towards this cooperation was provided by the 2006 formation of the BRICS group of countries and the political initiative by the left-wing governments predominant during the early 2000s (particularly in Brazil, Argentina and Venezuela) to improve intra-regional cooperation while at the same time enhancing south-south cooperation. The export-dependent economic models pursued by the centre-left governments, while reducing poverty and inequality to some extent, ran into difficulties once commodity prices stagnated and growth slowed in the early to mid-2010s^v.

From a geopolitical point of view, a TTC between EU and Mercosur can become a way to counter Chinese influence in the Latin America and a soft tool for the EU to address pressing global concerns, such as climate change, sustainable development, and digital transformation in the region.

A TTC with Mercosur can complement the EU Global Gateway Initiative, with support to infrastructure in fields like digital communications, e-mobility, ICTS security and capacity building. Furthermore, this can make the initiative independent of the outcome of the EU-Mercosur trade deal negotiations.

Given the EU's prominent role in clean technologies, a strategic partnership with Mercosur can be centered around research and innovation. This entails fostering technological collaboration, such as e-mobility standards, and the exchange of technology to achieve several critical objectives. First, to facilitate the transition towards renewable energy sources; second, to enhance energy efficiency and curtail carbon emissions stemming from industrial operations; and third, to bolster local technological capacities aimed at advancing the circularity of economic processes.

In contrast to Chinese involvement in mining projects, the EU possesses an opportunity to establish raw materials partnerships characterized by a robust emphasis on both human rights and ecologically sustainable mineral extraction and mining practices.

The EU could contribute by advocating cleaner and socially accountable mining methods, notably through green finance initiatives and expanded concessional funding commitments from European development banks like the EIB and EBRD, as well as European Development Finance Institutions. Consequently, the EU's aspiration to secure access to critical minerals for facilitating the green transition could be harmonized with a genuine offer to collaboratively cultivate a sustainable mining agenda.

As the EU explores new ways to bolster its strategic autonomy and influence through soft power instruments, the case for extending the TTC framework to include the Mercosur states becomes increasingly compelling. Building on the success of previous TTC partnerships, such an arrangement would not only stimulate economic growth but also drive technological cooperation and geopolitical cohesion within the Mercosur region. By countering China's growing influence through collaborative initiatives, the EU can establish a strong foothold in South America while addressing pressing issues like climate change, sustainable development, and digital transformation.

On behalf of our client CharIN, we are pushing for global solutions in e-mobility with common standards and operational solutions. The TTC has proven and is proving most invaluable.

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