Introduction

The United States and the 27-member European Union (EU) share a highly integrated trade and economic relationship.¹ In 2021, the United States and the EU remained each other's largest overall trade and investment partner, despite recent major economic and other developments that have affected such ties, including the economic challenges and shifts in global activity arising from the ongoing Coronavirus Disease 2019 (COVID-19) pandemic; "Brexit," the departure from the EU of the United Kingdom (UK); and the rise of China as a major bilateral trading partner for both. Their ties are of global consequence, as the United States and the EU bloc are the world's two largest economies, comprising 43% of global gross domestic product (GDP) in 2020.²

Given the scope and magnitude of U.S.-EU trade and investment ties, efforts to strengthen and expand them by addressing remaining and new barriers to trade and investment historically have been a key part of U.S. trade policy. Over the past several decades, the United States and the EU have engaged on these issues through various bilateral dialogues and negotiations, such as on a proposed Transatlantic Trade and Investment Partnership (T-TIP)—though T-TIP and other U.S.-EU efforts have not yielded a comprehensive, bilateral free trade agreement (FTA). They also have worked to address these issues multilaterally in the World Trade Organization (WTO). The United States engages with the European Commission (the EU's executive) on trade policy matters, as trade policy is an area of exclusive EU competency.³

Bilateral trade relations were especially fraught during the Trump Administration.⁴ President Joe Biden has "underscored his support for the [EU] and his commitment to repair and revitalize the U.S.-EU partnership."⁵ Developments during the Biden Administration include new means of cooperation, progress toward resolving certain bilateral trade irritants, and cooperation to address pressing global trade challenges. Nevertheless, diverging views and frictions remain. The 117^th Congress may examine U.S. trade policy with respect to the EU in terms of resolving current trade frictions, deepening bilateral trade engagement and pursuing further trade liberalization, cooperating on global trade issues, and setting international rules and standards.

U.S.-EU Trade and Investment Ties

Total Trade. U.S.-EU total trade in goods and services grew on average by about 5% annually from 2010 through 2019. During this time, the UK, then a member of the EU, accounted for roughly one-fifth of total U.S.-EU goods and services trade. In 2020, U.S.-EU total trade in goods and services decreased by about 30% (see Figure 1).⁶ This drop reflected global trade and economic trends associated with the COVID-19 pandemic, as well as the UK's departure from the EU Single Market and Customs Union, after the end of the post-Brexit transition period, among other factors. In 2021, U.S.-EU total trade increased by 17%, reflecting some global economic recovery. The EU bloc remained the United States' largest overall trading partner in 2021 (see Figure 2), although U.S. trade with Canada and Mexico combined was 36% larger.

Figure 1. U.S. Trade with the EU, 2010-2021

Source: CRS, with data from the U.S. Bureau of Economic Analysis (BEA). Notes: The trade balance reflects the overall U.S. goods and services trade balance with the EU (U.S. exports of goods and services less U.S. imports of goods and services). Starting with 2020, the trade data for the EU exclude the United Kingdom (UK), reflecting the UK's withdrawal from the EU.

Figure 2. U.S. Trade with the EU and Other Top Trading Partners, 2021

Source: CRS, data from U.S. Bureau of Economic Analysis (BEA). Notes: The data are for U.S. goods and services trade with the trading partners. Total trade is exports plus imports. Figures may not add up to the total due to rounding. The EU bloc includes members that are also top trading partners for the United States by country; for instance, in 2021, U.S. trade with Germany totaled $267 billion, accounting for 4.5% of U.S. world trade.

Goods. In 2021, the EU accounted for almost one-fifth of total U.S. goods trade. It was the United States' third largest goods export destination, after Canada and Mexico; and its second largest supplier of goods, after China. Total goods trade grew by 18% in 2021, after contracting by 24% in 2020 (see Figure 3). The U.S. goods trade deficit with the EU has increased over time.

In addition to conducting trade of products that belong to different industries ("inter-industry trade"), the United States and the EU, as highly advanced economies, trade heavily in similar goods within the same industry ("intra-industry trade"). The latter often consists of trade in components or intermediate goods used to produce complex products such as cars and machinery, allowing firms to specialize and benefit from economies of scale by focusing on different parts of the supply chain. Intermediate goods often are traded across the Atlantic between multinational enterprises (MNEs) and their affiliates (e.g., BMW in Germany trading with BMW in South Carolina). The UK formerly comprised around 15% of total U.S.-EU goods trade. Currently, U.S. top goods trading partners within the EU are Germany, the Netherlands, and France.

Services. The United States and the EU have the world's two largest services economies, which are highly integrated, reflecting the presence of supply chains, affiliate activity, and cross-border data flows. In 2021, the EU accounted for one-quarter of total U.S. services trade. While significant, U.S.-EU services trade flows in 2021 were 33% lower, compared to 2019 (see Figure 3). For many years, the United States has had a services trade surplus with the EU, but it has not been enough to offset the goods trade deficit. The UK formerly comprised about one-third of U.S.-EU services trade, and it was the United States' top services trading partner within the EU. Presently, Ireland and Germany are the top U.S. services trading partners within the EU.

Figure 3. U.S. Trade in Goods and Services with the EU

Source: CRS, with data from the U.S. Bureau of Economic Analysis (BEA, for goods and services trade trends and services trade product breakdowns) and the U.S. International Trade Commission (ITC, for goods trade product breakdowns). Notes: *Latest data available. Starting with 2020, the trade data for the EU exclude the United Kingdom (UK), reflecting the UK's withdrawal from the EU. The goods product categories are at the four-digit level of the North American Industry Classification System (NAICS) and exclude certain special categories.

Agriculture. U.S.-EU food and agricultural trade accounts for less than 1% of the value of overall U.S. goods and services trade. Yet the EU continues to be a leading market for U.S. agricultural exports, accounting for about 7% of the value of all U.S. exports and ranking as the fifth-largest market for U.S. food and farm exports in 2021—after China, Canada, Mexico, and Japan. Growth in U.S. agricultural exports to the EU, however, has not kept pace with growth in trade to other U.S. markets, and EU food and agricultural imports to the United States exceed U.S. exports to the EU. In 2021, U.S. exports of agricultural and related products to the EU totaled $12.7 billion, and U.S. imports of agricultural and related products from the EU totaled $36.7 billion, resulting in a U.S. trade deficit of $24.0 billion.⁷ Leading U.S. agricultural exports to the EU include corn and soybeans, tree nuts, distilled spirits, fish products, wine, beer, planting seeds, and processed foods. Leading U.S. imports from the EU include wine, spirits, beer, drinking waters, olive oil, cheese, and processed foods.

Investment. U.S.-EU foreign direct investment (FDI) ties are significant given their size and interdependent nature, and these ties are a key driver of trade. While the UK previously held a significant share of these ties—accounting for roughly 20%-25% of U.S inbound and outbound FDI with the EU in recent years, the United States and the EU remained each other's largest FDI partners in 2020. The magnitude of FDI reflects the partners' overall investment-friendly business climates and some firms' preference to reach customers through local presence. In 2020, U.S. FDI stock in the EU declined by about 23%, and the EU direct investment stock in the United States declined by about 15%, consistent with global contraction in FDI flows (see Figure 4).

Figure 4. U.S. Foreign Direct Investment (FDI) with the EU

Source: CRS, with data from the U.S. Bureau of Economic Analysis. Notes: FDI reflects stock on a historical-cost basis. Starting with 2020, the FDI data for the EU exclude the United Kingdom (UK), reflecting the UK's withdrawal from the EU.

Key Recent U.S.-EU Trade Developments

Trade and Technology Council

The Trade and Technology Council (TTC) is a new high-level engagement that aims to enhance wide-ranging cooperation between the United States and the EU and to promote their prosperity and competitiveness, as well as the spread of democratic, market-oriented values.⁸ The partners announced the TTC at their June 2021 Summit, at which they committed, among other things, to work together to strengthen their trade, investment, and technological cooperation.⁹ Since then, in addition to addressing bilateral trade issues, the TTC has emerged as a key tool in U.S.-EU cooperation to address global challenges, such as export controls, in response to Russia's war against Ukraine. It also may have ongoing significance in the context of broader U.S.-EU cooperation to address major concerns presented by China's state-led economic model and problematic trade practices of other nonmarket economies (NMEs, see "China and Other Nonmarket Economies").¹⁰ The TTC is led on the U.S. side by the U.S. Trade Representative (USTR), the Secretary of Commerce, and the Secretary of State; and on the EU side by the Commissioners for Trade and Competition of the European Commission.

At the inaugural TTC ministerial meeting in September 2021, the partners reaffirmed the TTC's objectives to "coordinate approaches to key global technology, economic, and trade issues; and to deepen transatlantic trade and economic relations, basing policies on shared democratic values." They established ten working groups on various topics (see text box). These working groups are to engage on coordination and cooperation approaches, best practices, technical consultations, information exchange, and outreach, among other activities.¹¹ Members of the Transatlantic Legislators Dialogue (TLD), a mode of bilateral engagement between Members of Congress and the European Parliament, welcomed the first TTC meeting, and have continued to show interest in the forum.¹² Business groups on both sides of the Atlantic have voiced support about the TTC's potential to deepen U.S.-EU trade ties, and some have also expressed their priorities for it.¹³

In the eight months between the first and second TTC ministerial meetings, the United States and EU sought to deepen cooperation through the various working groups. They also sought to enhance their relationship in other ways, including through consultations with their respective stakeholders.¹⁴ Stakeholders also issued statements on their priorities for the second TTC ministerial meeting, with some industry groups noting that stakeholders' "expectations ... are high" and calling for "outcomes across all TTC policy areas" to advance goals to address NME issues, and labor unions calling for "concrete deliverables" related to "worker rights and inclusive growth."¹⁵ In addition, since Russia's February 2022 invasion of Ukraine, TTC-related cooperation intensified in specific areas, including on export controls and sanctions.¹⁶

Second TTC Ministerial Meeting Outcomes

The United States and EU held their second TTC meeting on May 15-16, 2022, in Saclay-Paris, France, home to a research and development hub. In the Joint Statement released at the ministerial, they characterized their partnership as a "cornerstone of shared strength, prosperity, and commitment to freedom, democracy, and respect for human rights."¹⁷ The partners noted that they had "strengthened, deepened, and elevated" their relationship over the past year.¹⁸

As many observers predicted, the Joint Statement focused in large part on joint action and cooperation against Russia and in support of Ukraine, noting that, "As recent events have proven, strong transatlantic bonds and cooperation on issues related to trade, technology, and security are more important than ever."¹⁹ The partners also announced specific outcomes, including

• deepened information exchange on export controls related to critical U.S. and EU technology, with an initial focus on Russia and other potential sanctions evaders;
• creation of a U.S.-EU Strategic Standardization Information (SSI) mechanism to enable information-sharing on international standards development;
• formation of a sub-group to develop a joint roadmap on evaluation and measurement tools for trustworthy Artificial Intelligence (AI) and risk management;
• plans to work towards guiding principles, complementary and joint actions, and cooperation to mitigate risks and to advance the resilience of U.S. and EU supply chains;
• creation of a policy dialogue within the TTC on core issues of online content moderation and the intention to establish a new Cooperation Framework on issues related to information integrity during crises—to be focused initially on Russia;
• a stakeholder-focused Trade and Labor Dialogue with businesses and labor unions; and
• an early alert dialogue on shared trade concerns regarding third-countries measures.²⁰

Some outcomes of the May 2022 Joint Statement reportedly were moderated due to U.S.-EU differences on certain issues, including trade irritants.²¹ Any continued U.S.-EU progress on bilateral trade issues also may affect ongoing TTC work. According to some in U.S. industry, for instance, it is "critical" to finalize a new Transatlantic Data Privacy Framework. They contend that "Without secure data flows, meaningful progress on many other critical elements of the Council's agenda is not possible."²² Some commentators have also noted the lack of any new China-specific outcomes in the Joint Statement. A third TTC meeting is scheduled to take place before the end of 2022 in the United States.

Resolution of Certain Trade Frictions

Boeing-Airbus Subsidy Dispute and Related Tariff Actions

The United States and the EU each have long claimed that the other either directly or indirectly subsidizes its domestic large civil aircraft (LCA) industries.²³ The United States has claimed that the EU and certain states—France, Germany, Spain, and the UK (then as a EU member)—have provided, over the years, financing and other subsidies to their respective Airbus-affiliated companies to support LCA development, production, and marketing. The EU, on the other hand, has claimed that Boeing benefits from U.S. government support, mainly in the form of research and development (R&D) funds, as well as subsidies and infrastructure support.

From the 1970s to the 1990s, the United States and the EU negotiated bilaterally and multilaterally to address their respective concerns. These efforts failed and, in 2004, the United States resorted to WTO dispute settlement proceedings against the EU. The EU, in turn, initiated a WTO case against the United States. After nearly 15 years of litigation at the WTO, in October 2019, the WTO issued its final ruling on countermeasures in the U.S. case against the EU.

The WTO determined that the EU (including the UK) had not complied with a WTO ruling recommending the withdrawal of WTO-inconsistent subsidies on LCA manufacturing.²⁴ As a result, the United States began imposing additional tariffs, under "Section 301" (Title III of the Trade Act of 1974), on $7.5 billion worth of U.S. imports from the EU (about 1.5% of all U.S. goods imports from the EU in 2018), effective October 2019.²⁵ The action, consistent with the WTO finding on the appropriate level of countermeasures, aimed to pressure the EU into ending the subsidies or negotiating an agreement with the United States. The U.S. tariff list targeted mainly U.S. imports from the countries responsible for the illegal subsidies (France, Germany, Spain, and the UK), but was not limited to the aircraft industry.

In the parallel dispute case, the EU also received WTO authorization to take countermeasures against the United States for failing to abide by WTO subsidies rules with regard to U.S. support for Boeing.²⁶ In November 2020, the EU began imposing additional tariffs on approximately $4.0 billion worth of EU (and UK) imports from the United States. The USTR asserted no valid basis existed for the EU's retaliation due to full U.S. implementation of the WTO's recommendations as of early 2020.²⁷

In March 2021, the United States and the EU announced a four-month tariff moratorium to ease the economic burden on their respective LCA industries and workers, and to allow both sides to works towards a preliminary agreement.²⁸ Then, in June 2021, they announced an "Understanding on a Cooperative Framework for Large Civil Aircraft," under which they committed to suspend their countermeasures (i.e., tariffs) for five years and address long-standing disagreements and prevent new ones from arising.²⁹ They also expressed their aim to offer any financing to Boeing and Airbus for LCA production and development on market terms and to provide LCA-related R&D funding through an open and transparent process. Both sides agreed to cooperate on addressing the challenge posed by NMEs to the U.S. and EU LCA sectors—including by sharing information and developing common approaches to screening inward and outward investments.

Digital Services Taxes

The United States and the EU have worked to reduce tensions over the EU's proposal and some EU members' measures to tax revenues that certain companies generate from providing digital services, measures commonly referred to as digital services taxes (DSTs).³⁰ In October 2021, the United States reached a "political agreement" with Austria, France, Italy, and Spain on each of these countries' treatment of its DST.³¹ Per the political agreement, each country agreed to transition from its DST to a new global tax framework under the Organisation for Economic Co-operation (OECD)/Group of Twenty (G-20).³² Expected to come into effect in 2023, the framework aims to address digital economy taxation issues and update the global tax system. MNEs would face a minimum 15% tax rate from 2023. Countries would need to take domestic procedures to implement the framework. The USTR, in conjunction with the U.S. Department of the Treasury, is monitoring DST-related implementation of the political agreement.³³

Per the political agreements, the Biden Administration cancelled additional U.S. duties on certain goods of the EU member states; the USTR had previously suspended the duties temporarily to allow time for the international tax negotiations to finish. The duties stemmed from past Section 301 investigations initiated by the Trump Administration, which concluded that the DSTs discriminated unfairly against U.S. firms and were inconsistent with prevailing international tax policy principles.

The Biden Administration previously ceased a Section 301 investigation of the EU's proposed DST. In an effort to support the negotiations on the global tax deal, the EU had not implemented a DST, which affected procedural time limits for the Section 301 investigations.³⁴ U.S.-EU cooperation to ease tensions over the EU's proposed DST measure reportedly was central to reaching a deal on the global tax framework.³⁵

Section 232 Steel and Aluminum Tariffs and Retaliatory Tariffs

In 2018, President Trump used authority under Section 232 of the Trade Expansion Act of 1962 to apply new tariffs on certain steel and aluminum imports after determining that they "threaten to impair" national security.³⁶ The EU strongly objected to the tariffs, especially on the national security grounds the United States used to apply them.³⁷ The EU imposed retaliatory tariffs of 10-25%, covering $1.3 billion in U.S. trade (2020 trade data), targeting sectors viewed by many as "iconic" in U.S. trade (e.g., Harley-Davidson motorcycles, Kentucky bourbon, Levi's jeans).³⁸ In October 2021, the United States and the EU announced a multifaceted agreement to address the tariffs on EU exports and EU retaliatory tariffs on certain U.S. exports.³⁹ The deal established a new TRQ system with specific conditions to replace the original Section 232 tariffs. The parties also agreed to suspend their related WTO disputes.

The agreement created a forum to strengthen U.S.-EU cooperation to address global overcapacity (e.g., with China), ensure market-oriented conditions, and reduce carbon intensity in these industries. The United States and the EU aim to establish a "Global Arrangement on Sustainable Steel and Aluminum" to tackle both overcapacity and greenhouse gas (GHG) emissions. They plan to invite partners to the arrangement who meet certain qualifications, such as supporting lowering carbon intensity and ensuring market-oriented conditions, and willingness to restrict market access to nonparticipants who do not meet such conditions.⁴⁰

Selected Trade Issues

Tariffs

After successive rounds of multilateral trade liberalization, average U.S. and EU tariffs are relatively low. In 2020, the simple average most-favored-nation (MFN) applied tariff rate was 3.4% for the United States and 5.1% for the EU.⁴¹ For each side, over 60% of bilateral merchandise flows and 40%-45% of agricultural trade are duty free. The tariffs that remain make imports more expensive. The USTR has highlighted, for instance, EU tariff rates of up to 26% for fish and seafood, 22% for trucks, 14% for bicycles, 10% for passenger vehicles, 10% for processed wood products, and 6.5% for fertilizers and plastics.⁴² USDA reports a calculated average EU tariff rate of 30% across all agricultural products, including products imported under an applied tariff and products imported under a tariff rate quota (TRQ).⁴³ In recent years, due to certain trade actions, the United States imposed higher tariffs on certain products that it imports from the EU, and the EU raised tariffs on certain products that it imports from the United States; each has eliminated or replaced some of these tariffs with less restrictive arrangements (see "Resolution of Certain Trade Frictions").

Additional U.S. and EU tariff liberalization could have significant economic impact for the transatlantic economy, given the magnitude of commercial ties. Tariff reduction and elimination were a focus of past U.S.-EU trade agreement negotiations, but faced challenges, particularly in terms of sensitivities over agricultural tariffs.

Services

Europe represents the largest regional destination for U.S. cross-border exports of services, dominated by other business services and, specifically, professional and management consulting.⁴⁴ Total U.S. services trade (imports plus exports) with Europe were $548 billion in 2021, with the EU accounting for 59% of that trade.⁴⁵

Cross-border services are often provided online or on the telephone. These services are considered ICT-enabled or potentially ICT-enabled (PICTE) services, and include insurance and financial services; customer service; and business services like research, consulting, and engineering. PICTE services account for 85% of U.S. cross-border services exports to the EU and 68% of U.S. cross-border services imports from the EU.⁴⁶

Many services require direct contact between the supplier and consumer and, therefore, service providers often need to establish a presence in the country of the consumer through FDI. In 2019, Europe accounted for 57% of U.S service exports supplied to foreign consumers through U.S. company affiliates ($998 billion). Services revenue from U.S. affiliates operating within the EU was more than three times the value of U.S. cross-border exports ($291 billion) to Europe.⁴⁷

U.S. service providers have voiced concern about regulatory barriers in the EU and in some EU countries, especially for services provided locally (through affiliates) or digitally (PICTE services).⁴⁸ Trade barriers include, for example, "overly burdensome" procedures for certain licensing authorization (e.g., legal services) or EU nationality requirements for some services (e.g., pharmacy operations). Other barriers of note are in the telecommunications and audiovisual space, such as content requirements for cultural or language-based programming or local films. Many of these requirements extend to on-demand providers such as streaming services. Regulatory divergences can disrupt cross-border data flows and create barriers for services trade, whether for providers of PICTE services delivered digitally or for EU affiliates exchanging data with their U.S. headquarters (see "Digital Trade and Technology").

Digital Trade and Technology

U.S.-EU differences on issues such as digital regulation, privacy, and national security, have posed challenges in U.S.-EU relations. The United States and the EU have concluded several data transfer agreements to enable cross-border data flows in the commercial and law enforcement sectors. In July 2020, the Court of Justice of the European Union (CJEU) invalidated the most recent commercial data transfer accord, the U.S.-EU Privacy Shield Framework, finding that it failed to meet EU data protection standards due to the extent of U.S. surveillance laws. As a result, U.S. and EU companies that relied on the framework face legal uncertainty and limited options for cross-border data flows, threatening their ability to conduct trade. In March 2022, the Biden Administration and European Commission announced a new Trans-Atlantic Data Privacy Framework to replace Privacy Shield.⁴⁹ While details have yet to emerge, the "deal in principle" is to strengthen the privacy and civil liberty safeguards and include new accountability mechanisms to address the CJEU's concerns. Some policymakers and experts suggest, however, that a recent U.S. Supreme Court ruling that reinforces the federal government's state secret privilege for surveillance cases may pose a threat to the new framework's safeguards.⁵⁰

The EU aims to strengthen and improve the bloc's digital competitiveness, especially vis-à-vis the United States and China.⁵¹ European Commission initiatives include proposals that address prominent, and often controversial, digital trade and technology issues (see text box). Some Members of Congress, Administration officials, and analysts have raised concerns that the proposals may unfairly target large U.S. technology firms.⁵² Other Members have proposed U.S. legislation to address similar concerns around online competition and content that could target the same large technology firms as the EU proposals.⁵³

The TTC has several digital trade-related working groups: technology standards (e.g., AI⁵⁴), supply chains, ICT security and interoperability, data governance and technology platforms, and small- and medium-sized enterprise access to digital tools. Some observers see an opportunity through the TTC to better align U.S. and EU technology policies and incentives, and help U.S. and EU firms to partner and build synergies rather than duplicate or compete in certain areas.⁵⁵

Agriculture

Long-standing U.S. objectives with respect to U.S. agricultural trade with the EU have included greater market access, changes to the EU's administration of tariff rate quotas (TRQs), and changes to a variety of EU regulations, such as those involving sanitary and phytosanitary (SPS) standards and geographical indications (GIs).⁵⁷ However, past U.S. efforts to negotiate a trade agreement with the EU on food and agriculture issues were unsuccessful, and certain trade disputes involving agricultural products are long-standing and remain unresolved. These disputes have limited U.S. agricultural product exports to the EU, including some beef, poultry, and dairy products. U.S.-EU trade agreement negotiations during the Obama Administration stalled partly due to disagreement on how to address certain food and agricultural topics.

The EU's SPS standards can limit trade in food products that use biotechnology and other types of restricted production practices that are often commonplace in the United States. The EU's GI regulations also limit trade in certain foods, wine, and spirits that are labeled with EU-protected names that U.S. producers view as generic names. For example, U.S. cheeses using certain product names, such as parmesan and asiago, may not be exported for sale in the EU since only parmesan and asiago cheese produced in countries or regions currently holding GI registrations may be sold commercially. U.S.-EU trade agreement negotiations during the Obama Administration stalled partly due to disagreement on how to address EU TRQs and EU regulations involving SPS standards and GIs.⁵⁸ The Trump Administration's effort to negotiate a new U.S.-EU trade agreement was limited by the EU's decision to restrict the talks to "the elimination of industrial goods only" and to exclude agricultural products from its negotiating mandate (see "Bilateral Trade Agreement Negotiations").⁵⁹

The EU is actively pursuing changes within its food and agricultural sectors under its proposed Farm to Fork (F2F) and Biodiversity Strategy for 2030—both of which are part of the European Green Deal.⁶⁰ Combined, the F2F and Biodiversity Strategies would impose restrictions on EU agriculture (and potentially imported products); set 2030 targets to reduce methane emissions, environmental degradation, and chemical inputs and waste; and provide increased support for small-scale and organic farmers, tree planting, and wildlife habitat and animal welfare, among other goals. The proposal includes a carbon farming initiative as an example of a "new green business model" to reward carbon sequestration in agriculture and forestry. The EU expects to complete its related legislation by 2024-2025.

The EU's F2F and Biodiversity Strategies have drawn criticism from both the Trump and Biden Administrations. In general, U.S. trade officials have expressed concerns that the EU's proposed targets could restrict the use of certain types of production-related practices and create barriers to U.S. exports to the EU. An analysis by USDA found that the EU's proposal could result in reduced food production and higher food prices worldwide.⁶¹ Several other WTO member countries have raised similar concerns.⁶² USDA has also expressed concerns about the EU's reluctance to accept agricultural biotechnology and new plant breeding techniques. As part of the 2021 U.N. Food Systems Summit, the United States is inviting countries to join USDA's "Coalition of Action for Sustainable Productivity Growth for Food Security and Resource Conservation" (SPG Coalition) to promote "agricultural productivity growth to meet food and conservation needs" through technology use and innovation.⁶³ Preliminary press reports indicate that the EU is considering joining USDA's SPG Coalition. USDA also has announced its plans to invest in certain "climate smart commodities" in U.S. agricultural sectors.⁶⁴ In November 2021, the United States and the EU issued a formal statement on a newly created joint collaboration platform on agriculture, reaffirming their "mutual commitment to sustainable and climate-smart agricultural production."⁶⁵

At the May 2022 TTC ministerial meeting, the partners announced their intent to launch a dialogue to promote more diversified trade in agricultural commodities and inputs, and address over-reliance on certain trading partners. They also stated their intent to seek to identify discrete areas of cooperation aimed at strengthening the resilience of global food production through agricultural trade.⁶⁶

Government Procurement

EU and U.S. firms' access to government procurement markets in the United States and the EU is governed by the WTO Agreement on Government Procurement (GPA).⁶⁷ The GPA enables U.S.-based businesses to bid for certain government contracts in the EU and its members. Likewise, it allows EU-based companies to bid for contracts tendered by certain U.S. procuring entities in areas where federal and state governments have agreed to open up their procurement markets.

Because parties bound by the GPA negotiate market access commitments on a reciprocal basis, procurement coverage in each market varies considerably. Since the 1970s, the United States and the EU have sought to open each other's procurement markets to increase their own exports of goods and services. In recent years, U.S. and EU procurement expenditures are estimated to have equated to around 10% to 14% of GDP, respectively.⁶⁸ As a result, further market access in this sector could be of significant benefit to both partners.

The United States has sought to ensure fair, transparent, and predictable rules for government procurement, and nondiscriminatory treatment for U.S. suppliers. According to the USTR, gauging accurately the current level of U.S. participation in EU government procurement markets is difficult due to the EU's lack of country-of-origin data for winning bids.⁶⁹ In contract competitions conducted by EU member state governments, U.S. firms point to concerns over a lack of transparency, including overly narrow definitions of tenders, language and documentation barriers, and implicit biases in favor of local or EU vendors and state-owned enterprises (SOEs).⁷⁰

The EU, on the other hand, has sought to achieve greater access for EU firms to sub-central government procurement markets in the United States—access which only U.S. states, counties, and municipalities themselves can voluntarily grant.⁷¹ EU officials have also pointed to U.S. laws such as the Berry Amendment—which restricts government purchases of certain items to U.S. businesses for security reasons—and the Buy American Act—which provides a preference for U.S. goods in government purchases—as potentially injurious to EU companies that want to bid for U.S. procurement contracts.⁷²

Among other goals, both sides intend to explore possibilities for facilitating trade through digital tools and increased cooperation in the area of government procurement. At the second TTC meeting, the Climate and Clean Tech working group announced that both sides had discussed a "joint mapping of policies and a joint catalogue of best practices" related to green government procurement.⁷³ They also expressed their intention "to work towards a joint U.S.-EU initiative incorporating sustainability considerations" in government procurement approaches.

Intellectual Property Rights

The United States and the EU are both major innovation economies, maintain strong overall standards domestically to protect and enforce intellectual property rights (IPR), and generally prioritize IPR protection and enforcement as a key trade-negotiating objective. They were instrumental in the incorporation of IPR in the multilateral trade negotiations that led to the 1995 WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).⁷⁴ At the same time, some IPR issues have been contentious between the partners.

Treatment of IPR was a key focus in the past T-TIP negotiations. Some observers saw potential for T-TIP to include rules to protect and enforce IPR, as well as to cooperate on emerging challenges, such as cyber theft of trade secrets, to set global rules.

Differing approaches to protection and enforcement of GIs, however, was and remains a key difference (see "Agriculture"). The USTR has identified ongoing U.S. concerns and engagement in various fora regarding the EU's "overbroad" approach to GIs and efforts to advance its GI approach through its other trade agreements, which the United States argues negatively affects U.S. trademarks and access to foreign markets for U.S. products that use common names.⁷⁵

Among other things, the USTR notes that U.S. stakeholders have raised concerns that the EU's Digital Services Act (see "Digital Trade and Technology") could weaken the current liability regime and constrain existing standards and practices for addressing illegal content and activities, including online infringement of copyright and related rights.⁷⁶ The United States is monitoring the DSA and other copyright issues in the EU.

Multilaterally, the partners have been engaged in WTO discussions on potential "TRIPS waivers" for COVID-19 vaccines and other treatments. While the Biden Administration had voiced support for the concept of a limited IPR waiver for COVID-19 vaccines—a position that divides Members of Congress. The EU had resisted, arguing that existing TRIPS flexibilities to respond to the pandemic in terms of IPR issues were sufficient, and favoring other options, such as limiting the use of export restrictions and boosting manufacturing supply, as more effective means to support global COVID-19 vaccines access.⁷⁷ High-level talks in which they have been involved led to a breakthrough on a potential waiver of WTO patent obligations for COVID-19 vaccines, but WTO members have not reached a final agreement on the issue.⁷⁸

Investment

The United States and the EU's generally favorable investment policies and overall business environments have helped to facilitate extensive transatlantic FDI and bilateral economic integration, although certain investment barriers remain, largely at the EU member-state level. The USTR cites, for instance, some EU members' foreign ownership limits, corruption, weak law enforcement, and unpredictable judicial processes as of concern for U.S. investors.⁷⁹

In launching the TTC, the United States and the EU stated they view openness to foreign investment as important to economic growth and innovation, and that they face common challenges in addressing related risks to national security. The partners are working to improve the understanding of their respective investment regime, the evolving threats related to certain foreign investments, and a sharing of best practices for identifying vulnerabilities in sensitive sectors.⁸⁰ In recent years, both partners have adopted regulations to strengthen their respective reviews of the potential national security implications of inbound foreign investment transactions. Both have faced growing concerns in this area due to the more assertive role of China and its state-led firms in the global economy, and both seek to focus more on the exchange of information regarding proposed foreign investments. The U.S. investment review mechanism, the Committee on Foreign Investment in the United States (CFIUS), dates to 1975, and Congress gave it additional authorities in 2018.⁸¹ The EU's mechanism, which became fully operational in October 2020, aims to harmonize and coordinate varying member state-level investment review mechanisms.⁸²

In the past T-TIP negotiations (see "Bilateral Trade Agreement Negotiations"), both sides sought to include investment market access and investor protections, but they disagreed on whether to include investor-state dispute settlement (ISDS).⁸³ While historically a core part of U.S. and European investment agreements with other countries, ISDS has been the subject of past active debates among U.S. and European policymakers and various stakeholders, particularly regarding the level of investor protection and related provisions to preserve governments' ability to regulate in pursuit of national public policy objectives.⁸⁴ In the T-TIP negotiations, the EU proposed to replace ISDS with a new bilateral Investment Court System (ICS)—which it has secured in some of its other trade agreements—that would include a standing body of judges and an appellate tribunal.⁸⁵ The Obama Administration and U.S. industry opposed the EU's proposal, preferring to retain ISDS, while some civil society groups asserted that the proposed ICS would not resolve their concerns about ISDS.⁸⁶

Debate over ISDS could re-emerge in any future U.S.-EU trade agreement negotiations. One policy question is what precedence the curtailment of ISDS in the United States-Mexico-Canada Agreement (USMCA) during the Trump Administration might have for potential future U.S. investment agreements and whether it may affect any gaps in future U.S. and EU positions on ISDS.⁸⁷ The EU, meanwhile, continues to pursue ICS, securing its inclusion in bilateral trade agreements with Canada, Mexico, Singapore, and Vietnam. The EU also has called for a Multilateral Investment Court (MIC) in international settings.⁸⁸

Regulatory Approaches and Cooperation

For decades, U.S. businesses and farmers have consistently identified divergent regulatory frameworks for goods and services as major barriers to transatlantic commerce.⁸⁹ While their purpose might be to protect consumers or the environment, regulations can also serve as nontariff barriers (NTBs), affecting the market access and competitive positions of foreign firms and adding to the costs of doing business, such as for exporting to or operating in the foreign market.⁹⁰ These measures generally include procedures or requirements with which it might be costly or administratively burdensome to comply (e.g., re-labeling, re-testing, or re-licensing), or do not reflect the United States' widely shared assessments of risks—generally based on scientific risk assessments—to consumers or the environment (e.g., on genetically modified organisms, GMOs, and chemicals).⁹¹ Other ongoing U.S. concerns relate to transparency, notification, and public participation in EU regulatory processes. The USTR holds that EU notifications often take place when it is too late to revise the measure to take into account legitimate concerns, including substantive or scientific, raised by other WTO members (e.g., on chemicals).⁹² The USTR also notes concerns that the EU's promotion of European regional or harmonized standards in other markets impedes market access for products that conform to international standards, even though international standards may meet or exceed the EU (or third country) regulatory requirements.⁹³

Given the magnitude of U.S.-EU commercial interaction, many economists agree that more cooperation, convergence, and transparency in regulations and standards-setting processes could lead to greater market access for both U.S. and EU firms and yield significant economic gains for certain sectors.⁹⁴ Many stakeholders acknowledge these potential gains, while others warn that domestic health and safety standards could be compromised if such efforts are driven solely by business interests.⁹⁵ They also caution against a potential "race to the bottom" as jurisdictions seek to advance the competitiveness of their own industries through lower standards and regulations.⁹⁶

Despite well-established channels and fora for exchanging views on these issues regularly, U.S.-EU progress over the years appears to have been limited. Long-standing differences in regulatory approaches have been stumbling blocks in previous U.S.-EU negotiations. Some differences relate to divergent public preferences and values. For example, more consumers in the EU than in the United States are averse to genetically modified foods.⁹⁷ In addition, the United States and the EU operate two different systems of risk management.⁹⁸ In the United States, regulators tend to work cooperatively with industry, leading them to engage in science-based, cost-benefit analysis, and be supportive of technological innovation. In the EU, regulators favor a more precautionary approach, often leading to relatively more stringent risk regulation.⁹⁹

Traditional forms of U.S.-EU regulatory cooperation include "horizontal" information exchanges and dialogues between regulators, Mutual Recognition Agreements (MRAs, see text box), and harmonization of regulatory standards. U.S. and EU regulators have engaged actively in these information exchanges since 1998, when the Transatlantic Economic Partnership (TEP) action plan called for both sides to identify and implement general government guidelines for effective regulatory cooperation.¹⁰⁰ In recent years, U.S. and EU negotiators, regulators, and industry representatives have been involved in regulatory cooperation and enhanced convergence in a number of sectors, including pharmaceuticals and medical device manufacturing.

The TTC also has a working group to cooperate on technology standards, especially emerging technologies. Other TTC working groups also may examine regulatory issues, such as the climate and clean technology working group. At the May 2022 TTC ministerial meeting, the United States and EU stated their intent to work together on developing mutually shared operating requirements and validation methodologies for testing of e-vehicles with their charging columns, in order to increase "the uptake of electro-mobility and promot[e] stable vehicle-to-grid integration across the U.S. and EU markets," among other goals.¹⁰¹

Supply Chains

U.S.-EU trade and investment ties are more integrated with the growth of global supply chains. Many U.S. and EU companies rely on transatlantic supply chains and sometimes-overlapping networks. For example, the U.S.-based Boeing and Europe-based Airbus each employ thousands of workers and have extensive supplier networks across the Atlantic.¹⁰³

U.S. and European policymakers and industry groups have raised shared concerns about China's position in global supply chains, particularly in light of recent supply challenges during the COVID-19 pandemic.¹⁰⁴ Notable supply chains of concern include personal protective equipment (PPE), active pharmaceutical ingredients (APIs), and rare earth elements, among others. In May 2021, the European Commission updated its industrial strategy to support forming "industrial alliances" across several sectors named in the Biden Administration's June 2021 supply chain report as "priority sectors," such as batteries and certain APIs, potentially opening new cooperation avenues. These shared interests present an opportunity to collaborate on supply chain diversification, deepen transatlantic ties, and develop alternative global markets.

The third TTC working group, led by Commerce and State on the U.S. side, was tasked with advancing supply chain resilience and security of supply in key sectors for the green and digital transition, with an initial focus on clean energy, pharmaceuticals, and critical materials.¹⁰⁵ Through increased transparency, identification of U.S. and EU respective sectoral capabilities, information sharing, and cooperation on strategies, the group aims to promote supply chain resilience and diversification. At the May 2022 TTC meeting, the group released specific statements related to solar power, rare earth magnets, and semiconductor supply chains, with specific plans to cooperate on each of them.¹⁰⁶

A dedicated track on semiconductors is to focus initially on short-term supply chain issues, with a view to enhancing U.S. and EU security of supply and the capacity of both sides to design and produce semiconductors.¹⁰⁷ The United States and the EU represented 21% of the world's semiconductor manufacturing capacity in 2020,¹⁰⁸ and each has respective strengths, significant mutual dependencies, and common external dependencies in supply chains. Both sides have proposed plans to invest in their domestic bases.¹⁰⁹ According to the TTC statement, the working group is to partner with the semiconductor industry and relevant stakeholders to identify bottlenecks, gaps and vulnerabilities, map domestic ecosystems, and enhance transparency and cooperation to improve resiliency in the supply chain.¹¹⁰ At the second ministerial, the partners announced their intention to develop an early warning system to better predict and address potential semiconductor supply chain disruptions and exchange information on subsidies.

China and Other Nonmarket Economies

Under the Biden Administration, the United States and the EU have committed to intensifying cooperation on the strategic and economic challenges posed by China and other NMEs. Several measures announced at the June 2021 U.S.-EU summit aim to foster collaboration to counter China's growing influence, especially in relation to trade and technology.¹¹¹ For example, the Administration has characterized the TTC, launched at the summit, as a key component of U.S.-EU cooperation to address common challenges with respect to nonmarket policies and practices, including combatting economic coercion (see "Trade and Technology Council").¹¹² A number of the TTC working groups are expected to focus on China-related issues, including the Global Trade Challenges working group. In November 2021, the United States, the EU, and Japan also renewed a trilateral partnership initiated by the Trump Administration to address the global challenges posed by NMEs, including under WTO rules.¹¹³

During the second ministerial meeting, the parties "recognize[d] the importance of an open and fair multilateral rules-based system and the need to reform the WTO," and they committed to continue cooperating on shared trade concerns. They announced plans to jointly develop or coordinate strategies, using available policies and tools, to counter the negative impact that non-market, trade-distortive policies and practices—including the use of government-owned or controlled investment funds—have on the technological development and global competitiveness of priority sectors. They also announced their intention "to establish a trade coordination dialogue to exchange information at an early stage on initiatives or measures of third countries that either side believes constitute or could evolve into a significant trade barrier for U.S. and EU businesses." Although many observers predicted that the two sides would announce a more coordinated effort to address China's industrial policies, the joint statement appears to leave concrete steps to address that issue as an item for future discussion.¹¹⁴

At the same time, the EU has approached the U.S.-China trade tensions with caution. Such tensions took on a new level of focus under the Trump Administration's unilateral tariff actions against China—actions that remain in effect under President Biden—and increasingly focus on U.S.-China strategic competition. Some U.S. commentators hold that EU policymakers view China's economic growth as potential opportunities for EU firms and are reluctant to challenge a major economic partner.¹¹⁵ The EU has indicated a need to cooperate with China on common global concerns, such as climate change, health security, arms control, and nonproliferation.¹¹⁶ These are areas in which the United States seeks to work with China to varying degrees as well. Different views or approaches among EU member states with respect to the extent of their economic ties with China could make the formulation of an EU-wide position more difficult and potentially hinder efforts to promote closer U.S.-EU policy alignment toward China.

Selected Ongoing and Emerging Issues

Worker Rights and Environmental Issues

The United States and the EU maintain high levels of domestic protection on worker rights and the environment. Their trade agreements with other countries include commitments in these areas, but have similarities and differences.¹¹⁷ For example, they both commit to uphold International Labor Organization (ILO) commitments and multilateral environmental agreements (MEAs). Recent EU trade, however, also often refer to additional ILO instruments (e.g., conventions) and include climate-related commitments, with goals to reduce greenhouse gas emissions. In contrast, amendments to the 2015 Trade Promotion Authority (TPA) legislation, now expired, added an overall negotiating objective "to ensure that trade agreements do not establish obligations for the United States regarding greenhouse gas emissions... other than those fulfilling the other negotiating objectives" in TPA.¹¹⁸ At the same time, U.S. FTAs have greater enforcement mechanisms for labor standards and environmental commitments, compared to EU FTAs.¹¹⁹ The European Commission has been conducting a review of the 15-Point Action Plan on Trade and Sustainable Development (TSD), which is to cover all aspects of TSD implementation and enforcement, including the scope of commitments, monitoring mechanisms, and the possibility of sanctions for noncompliance.¹²⁰

In its trade policy, the Biden Administration has highlighted ongoing and planned cooperation with the EU through the TTC to advance the Administration's "worker-centered trade policy" and shared priorities "to address climate change."¹²¹ Additionally, the TTC joint statement articulates U.S.-EU aims to protect fundamental labor rights, including by combatting forced and child labor and through bilateral and multilateral trade policies, which may intersect with policy responses regarding global supply chains. In the TTC, the partners committed to reaching net-zero emissions and increasing access to and availability of clean energy technologies, as well as to consulting on including trade-related climate and environmental issues in their work streams.¹²²

The United States and EU intend to jointly consult relevant social stakeholders on transatlantic trade and labor issues, with a focus on ways to help workers and firms make successful digital and green transitions, remain globally competitive, and enjoy broad and inclusive prosperity. To this end, at the May 2022 TTC ministerial meeting, they announced the establishment of a tripartite trade and labor dialogue (TALD), involving representatives from the U.S. government, European Commission, and U.S. and EU trade unions and businesses. The TALD is set to convene annually at the ministerial level, with its first meeting scheduled for summer 2022.

U.S. policymakers may closely monitor the EU's proposal, introduced in July 2021, to establish a new carbon border adjustment (CBA) mechanism that could place a fee on certain carbon-intensive imports, based on costs that the EU currently imposes on domestic industry through its Emissions Trading System (ETS).¹²³ The United States is among the countries whose exporters could face such a fee. Some analysts have called for the WTO to pursue rules regarding decarbonization, and for trading partners to hold off on unilateral measures in the meantime.¹²⁴

Export Controls

Through the TTC and related working group activity, the partners seek to cooperate on improving U.S. and EU systems for dual-use export controls, including for sensitive emerging technologies, and on protecting human rights.¹²⁵ Some U.S. business groups have voiced support for such cooperation, while urging that controls be the least trade-restrictive possible and narrowly targeted to continue to promote economic competitiveness.¹²⁶ The TTC reportedly helped to facilitate coordination among the United States, the EU, and other allies on export controls against Russia, such as on certain technologies, in response to Russia's war on Ukraine.¹²⁷ A senior Administration official noted export controls "as an example of where deep technical collaboration that was happening in TTC prior to Russia's invasion of Ukraine was able to be leveraged so we could move with remarkable speed to put in place these [sic] unprecedented collaboration on export controls."¹²⁸ According to press reporting, a few officials remarked that the TTC's working groups allowed for faster action and cooperation because the appropriate individuals were already in communication with each other and could quickly refocus on Russia.¹²⁹

Energy Trade and Russia

Energy trade was part of the past T-TIP negotiations in terms of market access and regulatory frameworks. The issue has taken on renewed importance in the face of growing concerns about Russia's war on Ukraine and the EU's dependency on Russian energy imports. The United States supports efforts to diversify the EU's energy resources away from Russia. Congress, for instance, directed various agency heads to prioritize support for energy infrastructure projects, such as the construction of new liquefied natural gas (LNG) terminals, in Europe and Eurasia, and some policymakers are examining other opportunities to support efforts to strengthen the EU's energy security.¹³⁰ In addition, the TTC supply chains working group includes a focus on clean energy, among other sectors.

Economic Coercion

U.S. policymakers may closely monitor a potential new anti-coercion instrument (ACI) in EU trade policy. The ACI could allow the EU to restrict access of third countries to the EU's trade and investment markets, in order to deter these countries from pursuing trade or investment restrictions against the EU to bring about a change in EU policy.¹³¹ According to an EU impact assessment report on the proposed ACI, the EU's concerns about economic coercion by third countries emerged with the possible imposition of DST-related trade measures by the United States (see "Digital Services Taxes").¹³² The EU has also cited, as an example, actions taken by China, including its discriminatory trade practices against Lithuania after the latter expanded commercial ties with Taiwan.¹³³ Some observers see the proposed ACI as a parallel to the U.S. "Section 301" statute, which provides the U.S. executive with authority to impose unilateral trade restrictions in response to foreign trade barriers and other trade partner practices.¹³⁴ Some observers see China's economic pressure on Lithuania as a case-in-point of the proposed ACI's utility, while others are concerned that the ACI is protectionist and may pull the EU into tit-for-tat measures in trade disputes.¹³⁵

At the May 2022 TTC ministerial meeting, the United States and EU stated their intent to discuss potential coordinated or joint responses to economic coercion (i.e., the use of trade and economic restrictions to further geopolitical aims) affecting trade or investment by the United States, the EU, and their trading partners and allies.¹³⁶

Infrastructure

The United States and EU have a joint interest in protecting and promoting safe and secure infrastructure globally. As part of the TTC, the partners have articulated a specific interest in digital infrastructure and seek to support partners through investments based on principles of good governance, transparency, accountability, and financial sustainability.¹³⁷ At the second ministerial, the TTC working group focused on promoting secure information and communications technology and services ("ICTS") supply chains in the United States, the EU, and third countries announced a taskforce on public financing for secure and resilient connectivity and ICTS supply chains in third countries. The new ICTS-related taskforce is to examine how to strengthen financing for ICTS infrastructure in partner countries.¹³⁸

The partners also are involved in various other efforts to support infrastructure investments in developing countries, such as using infrastructure initiatives to both advance prosperity and address climate issues.¹³⁹ Among other efforts, the U.S. International Development Finance Corporation (DFC) and European development finance institution (DFI) counterparts are collaborating to support financing of private sector investments in infrastructure development in low- and middle-income countries.¹⁴⁰

Bilateral Trade Agreement Negotiations

The United States and the EU have overlapping networks of FTAs (see text box), but no FTA with each other. Successive U.S. Administrations have sought to address remaining barriers to U.S.-EU trade and expand ties, including through trade liberalization negotiations. The most extensive of these efforts was during the Obama Administration on a proposed T-TIP to boost U.S.-EU economic growth and jobs, respond to increased competition from emerging markets, and develop globally relevant trade rules. In the T-TIP negotiations, launched in 2013, the partners sought to address remaining U.S.-EU barriers to trade and investment in goods, services, and agriculture through: reducing and eliminating tariffs; further opening services and public procurement markets; enhancing cooperation and transparency in regulations and standards-setting; and strengthening rules in areas such as IPR, investment, digital trade, the environment, worker rights, and SOEs.

After 15 rounds, T-TIP negotiations stalled in 2016 over key differences—some of which persist—in U.S. and EU positions on certain issues. U.S. concerns included EU regulatory measures that limit the use of growth hormones and pathogen reduction treatments (e.g., chlorine washes) in meat production; treatment of GIs; and approach to ISDS. Talks on digital trade faced complications due to EU engagement on parallel issues in its internal market and EU concerns over U.S. government surveillance. Other sensitivities included agricultural tariff reductions and access to sub-central public procurement markets.

The Trump Administration and the EU Commission did not renew the stalled T-TIP negotiations. U.S.-EU trade relations faced heightened tensions largely related to the Administration's criticism of "unfair" EU trade practices and U.S. unilateral tariff measures. After a July 2018 visit by the President of the European Commission to the White House, the partners sought to deescalate trade tensions by working to address remaining trade barriers and expand trade. In October 2018, the Trump Administration notified Congress under the 2015 TPA (P.L. 114-26, now expired) of a potential U.S. trade agreement negotiation with the EU. In comparison to the U.S. interest in addressing tariffs and NTBs, the EU sought limited negotiations on industrial tariffs (i.e., non-agricultural) and regulatory issues (via a conformity assessment agreement)—reportedly to defuse bilateral trade tensions.¹⁴⁴ The EU's desire to exclude agriculture from the negotiations was a key sticking point for many Members. Potential U.S. Section 232 auto tariffs and Brexit-related uncertainty added complications.

The talks stalled in 2019, but the two sides reached a limited tariff agreement in August 2020 under which the EU eliminated tariffs on certain lobster products and the United States reduced by 50% tariffs on certain products (e.g., certain prepared meals, certain glassware, surface preparations, propellant powders, cigarette lighters and parts)—both on an MFN basis.¹⁴⁵ They expressed an aim for this "package[ ... ] to mark just the beginning of a process that will lead to additional agreements that create more free, fair, and reciprocal transatlantic trade."¹⁴⁶

The Biden Administration has not indicated interest in taking up the previous U.S.-EU negotiations. The EU also has not appeared to push for a renewal of FTA negotiations, potentially still wary of the T-TIP experience. A European Parliament resolution, however, previously called for building on the momentum from the August 2020, limited tariff deal to work on a broader U.S.-EU trade agenda.¹⁴⁷ More recently, in the wake of Russia's invasion of Ukraine and interest among policymakers to deepen U.S.-EU ties, some commentators have called for the United States and the EU to renew efforts to negotiate a bilateral trade deal.¹⁴⁸

Multilateral Cooperation and Frictions

In the post-World War II period, the United States and the EU led in promoting trade liberalization and developing the rules-based international trading system that is underpinned by the WTO.¹⁴⁹ The Trump Administration's skepticism of the WTO and threats to flout WTO rules deeply concerned EU officials.¹⁵⁰ More broadly, many observers remain concerned that the WTO's effectiveness has diminished since the collapse of the last round of multilateral trade negotiations and believe the WTO needs to negotiate new rules and adopt reforms.¹⁵¹ To date, WTO members have not reached consensus for a new comprehensive agreement, though negotiations on discrete topics continue. During the Biden Administration, the United States and the EU have pledged to "uphold and reform" the rules-based multilateral trading system.¹⁵² Divergent trade policy views among many major trading economies within the WTO, however, present challenges to a path forward on negotiations.

The United States and the EU, along with like-minded partners, cooperate on a range of global trade issues, although U.S. and EU views on the approaches differ in some cases.¹⁵³ A major joint focus is tackling the challenges posed by China and other NMEs on global overcapacity, subsidies, SOEs, forced technology transfer, and global supply chains—issues for which both sides view current WTO rules as insufficient. A recent area of cooperation is on responses to Russia's war on Ukraine. In April 2022, Congress passed legislation (P.L. 117-110) to suspend permanent normal trade relations status with Russia; permanent normal trade relations status provides unconditional, nondiscriminatory, MFN treatment by the United States to goods and services trade with the trading partner.¹⁵⁴ The EU also has moved to revoke Russia's MFN status.¹⁵⁵ The partners are cooperating on imposing export controls against Russia as well. Within the WTO, other priority issues for cooperation include ongoing WTO negotiations on fisheries subsidies, and developing a trade response to the COVID-19 pandemic.

The WTO dispute settlement mechanism (DSM) has been a vehicle for U.S. and EU efforts to resolve disagreements on some trade matters, including China-related concerns.¹⁵⁶ The United States and the EU have also used the DSM to address trade disputes against each other—a classic example being the long-running Boeing-Airbus subsidies disputes (see "Boeing-Airbus Subsidy Dispute and Related Tariff Actions").

The WTO DSM is also the subject of ongoing reform efforts by WTO members. A key EU concern is the U.S. practice under successive Administrations of blocking new appointments to the WTO Appellate Body (AB, which reviews appeals of dispute panel findings). The United States justifies its actions by citing concerns about perceived judicial overreach in the AB. Due to U.S. actions, since December 2019, the AB has lacked a quorum and has been unable to hear new cases. Thus far, the United States has rejected proposed reforms by the EU and others to address U.S. concerns. In 2020, over 20 WTO members led by the EU put into effect an ad hoc arbitration arrangement to hear appeals on cases amongst themselves.¹⁵⁷ Some European officials have expressed frustration with what they describe as a mismatch between U.S. rhetoric to support WTO reform and a lack of U.S. willingness to address some issues, such as the AB.¹⁵⁸

The United States and the EU also engage on bilateral and global trade issues in other international economic bodies. In some cases, this engagement has helped to resolve ongoing bilateral tensions. For example, the OECD/G-20 global tax framework facilitated political agreements between the United States and several EU member states regarding their DSTs, previously an area of U.S.-EU friction (see "Digital Services Taxes"). However, bilateral trade frictions remain on certain issues under these bodies. For instance, the USTR notes U.S. concerns over EU efforts to pursue enhanced disciplines for GIs in the World Intellectual Property Organization (WIPO).¹⁵⁹

Issues for Congress

The magnitude and multifaceted nature of U.S. trade and investment ties with the EU makes U.S.-EU trade relations a key part of U.S. trade policy. U.S.-EU trade relations are highly consequential to the U.S. economy as a whole and overall U.S. prosperity, U.S. businesses and workers in many sectors, and constituent interests. These ties also are globally significant, given the weight that U.S.-EU cooperation or divergence on issues can have for setting and shaping international rules and standards. As such, numerous Members of Congress have a broad and enduring interest in engaging on U.S.-EU trade relations, as part of their overall role in overseeing and shaping U.S. trade policy. Key oversight and legislative issues include the following.

Resolutions to Current Trade Frictions

The United States and the EU have made progress on addressing a number of trade frictions; however, in some cases, the solutions are temporary and require longer-term arrangements or further implementation to fully resolve the issues. Congress may continue to monitor the Administration's progress in the implementation of the agreements, and engage with the Administration to ensure a comprehensive and durable U.S.-EU negotiated solution to the issues. This may include overseeing the implementation of interim agreements and shaping longer-term solutions for both aircraft subsidies and steel and aluminum trade. Congress also may seek to examine the benefits and costs to the U.S. economy, specific industries and workers of the implementation of these and other resolutions, such as on the DST framework. (See "Key Recent U.S.-EU Trade Developments" for a discussion of these various trade frictions and solutions.)

If U.S. trade policy towards the EU continues to focus on addressing specific trade issues, Members may seek to shape how the Biden Administration prioritizes them, including in the TTC. Members also may monitor developments in EU internal proposals regarding digital trade, economic coercion, and decarbonization concerns, which may have implications for the openness of EU commercial markets and for U.S. firms doing business in those markets.

Engagement in and Prospects for the TTC

Given the prominent position of the U.S.-EU Trade and Technology Council in bilateral trade relations since its establishment in 2021, Members of Congress may examine and weigh in on the TTC's structure, priorities and scope, and prospects for "success."

In terms of the TTC's organizational structure, Members may consider whether to establish a parliamentary component—for instance, creating opportunities for select Members to hold bilateral sessions with their counterparts in conjunction with the TTC meetings, potentially as part of the U.S. delegation, or creating a related congressional advisory council. In doing so, Members may examine how such potential additions relate to other ongoing congressional engagement in U.S. trade policy and bilateral parliamentary engagement in the TLD.¹⁶⁰ Members also may examine how TLD discussions could shape TTC priorities and outcomes.

Another potential issue of congressional interest might be the TTC's scope and its alignment with congressional priorities for U.S.-EU trade relations and other matters. Members may weigh in on the TTC's anticipated prioritization of more recent or urgent issues (such as joint responses to Russia's aggression in Ukraine), compared to other bilateral trade and technology issues (such as digital inclusion) that were priorities at the time of the TTC launch.¹⁶¹ Members may explore potential trade-offs in priorities and/or opportunities to expand the TTC, such as by creating additional working groups or structures to sustain intensified cooperation on major bilateral trade issues. This may include a review of whether to modify the scope of the TTC's working groups to address bilateral tariffs and other market access issues. Congress also may explore opportunities through the TTC to intensify U.S.-EU cooperation to remove regulatory barriers.

Further, Members may examine the TTC's prospects for success and its ability to produce concrete outcomes, and also seek to establish the metrics by which to gauge the TTC's effectiveness. While many frictions remain in U.S.-EU trade ties, a desire by the partners to show transatlantic unity in the face of Russia's war on Ukraine could give a boost to U.S.-EU cooperation and joint action on trade issues, including with respect to China.¹⁶²

Members also may examine the implications of the EU's move to establish a TTC with India as well, including what it may signify about the role of a TTC in the EU's trade relations more broadly.¹⁶³

Potential New Negotiations on a Trade Liberalization Agreement

Over the years, many Members of Congress have voiced support for expanding or renewing U.S.-EU trade engagement and negotiations to eliminate and reduce remaining tariff and nontariff barriers. While President Biden pledged to work to deepen the U.S.-EU trade and economic relationship, the current outlook for bilateral trade agreement negotiations is unclear. Members may examine whether to pursue potential market opening opportunities through the TTC for future formal FTA talks, or pursue such talks separately. On one hand, potential FTA negotiations that develop out of the TTC could benefit from the intensified cooperation and renewed trust that the TTC may foster. On the other hand, such talks may be limited if they do not address bilateral tariffs or other market access issues. As part of other economic initiatives, such as the proposed Indo-Pacific Economic Framework for Prosperity (IPEF), some Members have urged the Administration to prioritize addressing tariffs and other market access issues.¹⁶⁴

If the Administration revisits formal U.S.-EU trade negotiations, Congress may seek to shape and oversee them. If the Administration seeks to request TPA reauthorization and Congress considers it, a key issue could be U.S. negotiating objectives for future trade agreements, such as a potential U.S.-EU FTA. Additional issues include how to best address previous sticking points, how the removal of the UK's leading voice on trade liberalization from the EU may affect gaps in U.S. and EU trade negotiating positions, any lessons learned from past efforts such as T-TIP, and the likelihood of attaining a successful outcome. Congress also may examine whether such negotiations should focus on a limited trade deal (e.g., the U.S. approach with Japan under the previous Administration) to secure targeted "wins," or a more comprehensive and commercially meaningful FTA to secure liberalization across sectors.

Congress also may examine the effects of a potential agreement on the U.S. economy. A general consensus exists that the aggregate economic benefits of an FTA would outweigh the costs for specific sectors and industries. Most studies find that a U.S.-EU FTA, whether addressing tariffs or also NTBs, would yield net gains for the U.S. economy, although estimates vary about the magnitude.¹⁶⁵ Given the relatively low U.S.-EU tariffs on average, such assessments find that more gains could come from reducing NTBs. Ultimately, the impact would depend on the FTA's scope and level of commitments.

In addition to or in the absence of U.S.-EU FTA negotiations, Congress may seek to intensify regulatory cooperation, such as through the TTC. Past efforts suggest that intensive regulator-to-regulator cooperation has the potential to remove many of the regulatory barriers to expanding U.S.-EU trade and investment.

Cooperation on Global Trade Challenges

The United States and the EU have a long history of cooperating bilaterally and multilaterally to address trade and economic issues and shared concerns. The robustness of this cooperation may take on more significance given the perceived magnitude of the challenges that the two partners face, whether in terms of the trade practices and economic policies of China and other NMEs, modernizing and reforming current multilateral trading rules, climate change, the COVID-19 pandemic, and more recently, Russia's war on Ukraine. The positions and approaches of the partners have varied on some issues. Members of Congress may examine to what extent U.S. and EU approaches are aligned, and the opportunities for and constraints to further cooperation. They also may examine the utility of different vehicles for cooperation on global trade challenges, whether through intensifying engagement in the WTO, renewing bilateral FTA discussions, or pressing for expanded cooperation in the TTC.

International Competition in Markets and Standards-Setting

The United States and the EU are not only trading partners, but their firms compete commercially in each other's markets and third-country markets around the world. They employ differing standards and regulatory approaches in certain sectors rooted in different cultures and traditions, and each is keenly interested in advancing its own approaches globally to streamline costs and mitigate disadvantages for their respective firms engaged in commercial activity.

Given EU and U.S. economic weight, commitments in each side's FTA network could set precedents for future agreements, as well as the development of global rules and standards. The strategic implications of EU FTAs—particularly as the number concluded has increased in recent years, and with trade partners that the United States has yet to conclude agreements—are of interest to U.S. stakeholders. If the United States and the EU can reach consensus on trade and regulatory issues, they may have an opportunity to jointly write global "rules for the road." Such harmonization could benefit not only U.S. and EU firms, but also those in developing countries, which currently may face prohibitive costs in attempting to comply with differing regulatory requirements in the world's two most important export markets. However, if the United States and the EU continue pursuing different standards, they may not only entrench different spheres of standards and potentially create inefficiencies in global supply chains and trade, but also provide openings for other economies, such as China, to advance its own standards.

Some analysts express hope the TTC results in cooperation on common standards and guidelines to ensure shared foundations and complementary approaches, even if EU and U.S. regulatory or legal systems vary—cooperation that may lead to the better establishment of international norms.¹⁶⁶ Creating a bilateral consensus could strengthen a joint U.S.-EU position to counter China in forums such as international standards bodies or the WTO, and promote economic development by making it easier for firms in developing countries to export to both markets. Yet, internal differences in the United States (e.g., on national data privacy legislation) or the EU (e.g., on online content rules) may continue to create challenges for broader agreement.