EIT Digital presents new report on the EU - US Tech Relationship

Evangelos Marios Kemos

The transatlantic partnership should move somewhere towards the middle of four scenarios that look on the one hand the degree of regulatory alignment and on the other hand, the industry collaboration. To unlock the full potential of an economic and technological partnership, stronger regulatory alignment, more integrated and trans-Atlantic R&D and Innovation systems, and deeper business collaboration and more high-level trade agreements are needed. In addition, a collaboration between the EU and the U.S. on technology should embrace a geopolitical perspective that includes the defence of market and democratic principles globally.

A changing global economic order

In the recent past, the EU and the U.S. have released analyses of their strategic dependencies and proposals of actions to mitigate them. Both identified semiconductors, pharmaceuticals, batteries and ‘rare earths’ as strategic sectors with vulnerable supply chains due to their highly concentrated reliance on a small number of suppliers. The need for such action plans is motivated by a changing world economic order and were accelerated through the COVID pandemic, as well as Russia’s aggression in Ukraine. In addition, China’s ambivalent position on the war in Ukraine has brought new light to its mercantilism and the dangers implicit in the rise of techno-nationalism and competitive autarchy, as the conflict has accentuated the autocracy-democracy divide. At its highest level the war has also brought home to Europe, the United States, and other democracies the issue of strategic dependencies.

The war, besides the issue of energy, has further affected global supply chains that had already been disrupted during the pandemic. These shocks have made it even more important than before for both US and the EU companies to rethink their regional and global supply networks. While war in Ukraine is the focus of short-term action, new thinking has also focused attention on China, given its critical role in global supply chains and growing concern with its geostrategic objectives. Its focus on a range of technology domains where it explicitly seeks either global leadership or market dominance (including semiconductors, solar energy, rare earth magnets (REMs), electric vehicles, and artificial intelligence), when coupled with its more aggressive geopolitical stance, pose a challenge to market democracies that can no longer be avoided.

The Ukraine war and China’s rise have thus given new impetus to the imperative of resetting and reinforcing the transatlantic partnership and the broader liberal-democratic order it represents. They have re-enforced a process that was already underway since the end of 2020. In 2021 the U.S.-EU Trade and Technology Council (TTC) was established. In its inaugural statement the TTC expressed support for ‘the continued growth of the EU-U.S. technology, economic and trade relationship, and cooperation in addressing global challenges’. Most recently, in May 2022 TTC’s 50-page statement that it produced the new course became clear. Points 14-17 of the statement explicitly outline an ambition for coordinated economic actions between “trustworthy and reliable partners” to parry attempts by “autocratic countries” to “undermine the security of other nations.” These recent statements and the establishment of the TTC represent an opening round, the vision, and the intention, that needs to be made reality. There are still tensions and issues to be resolved. A series of actions related to the ongoing transatlantic reset and realignment have been taken (e.g., Boeing-Airbus dispute, U.S. tariffs on European steel and aluminium and European tariffs on U.S. goods). Divergences and irritants do however remain (e.g., U.S.-EU Privacy Shield, Digital Markets Act, “Buy America” rules, Inflation Reduction Act (IRA) for electric vehicle tax credits).

This is happening as trade and investment between the United States and Europe have grown significantly. In 2022 the U.S. imported more from Europe than from China, reversing the pattern where since 2010 China has been America’s dominant trade partner. In September 2022 Germany’s exports to the US surged 50% on a year-over-year basis. The U.S. has also become a major military and energy supplier, supporting the strengthening of European defences, and helping to replace Russia as a natural gas supplier. As some European companies have shifted investment from China to the U.S., Europe’s foreign direct investment in the U.S. grew 13.5% in 2021 to $3.2 trillion, as U.S. DFI in Europe grew 10% to roughly $4 trillion, dwarfing investment flows between the U.S. and China.

Our point of view

The new impetus to transatlantic unity with the TTC as its vehicle should help the U.S. and EU address these issues and move towards a more stable and collaborative relationship. Will this happen, and how might trans-Atlantic relations evolve?

This EIT Digital report addresses the above questions by developing future scenarios and assessing their implications. Chapter 2 provides an analysis of the state of digital regulation, a high-level picture of existing transatlantic economic ties, a characterisation of U.S. and EU technology specialisation, and a review of collaborative activities. However, the approach is selective, as an exhaustive survey of the transatlantic economy is beyond this study’s scope and space. In chapter 3 the report highlights convergences and divergences, moving on to present four scenarios. Chapter 4 concludes with an assessment of the impact of the various scenarios and their policy implications.


Overall, there is not one ideal and best scenario when it comes to the expected outcomes. Ideally, the transatlantic partnership should move somewhere towards the middle of the four scenarios. To achieve this objective, the report draws the following conclusions.

1) Stronger regulatory alignment is needed to unlock the full potential of the cross-Atlantic economic and deeper technological collaboration. This requires a stepping up in political will to find common ground where possible on key issues such as:

  • Privacy shield and data exchange
  • Large platforms and competition
  • Artificial Intelligence
  • Cybersecurity

2) EU and U.S. should collaborate to build more integrated and trans-Atlantic R&D and Innovation systems.

  • NATO should be used to build cross-Atlantic military R&D collaboration, building on DARPA and emerging European defence research programmes.
  • The EU and U.S. should work together to connect and leverage their innovation ecosystems, to enable start-ups on both sides to cooperate in key technological fields and scale in both markets.
  • Joint efforts should be made to strengthen in a balanced manner the two-way exchange of talent across the Atlantic.

3) Business collaboration and trade agreements should move higher on the political agenda.

  • The TTC will be central to this process, but government-level trade agreements and bottom-up industry partnerships and alliances to accelerate industrial cooperation and complementarity in production and services are needed.
  • Stronger trans-Atlantic alignment is needed on state support for industry, as seen in the Inflation Reduction Act and its EU equivalents, or on the issue of semiconductor subsidies.

4) Trans-Atlantic collaboration on technology should embrace a geopolitical perspective that includes the defence of market and democratic principles globally. Joint principles should reflect the idea of technology for the good.

Our report was introduced in May in two events both in the US in the centre of the Silicon Valley and in Brussels, the epicentre of EU policy-making.

Download the full report

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Co-Funded by the European Union