At the conclusion of the first meeting of their new "Trade and Technology Council" (TTC) today, the U.S. and the EU issued a joint statement that covers a number of issues, including one described as "Trade Policy Cooperation towards Non-Market Economies (NMEs)." This piece summarizes the main points on this issue as set out in the statement. (The full text of this part of the statement is at the end of this piece.)

The statement begins with some general points about how the two sides see themselves as sharing values ("human and labor rights, environmental protection, the rule of law, non-discrimination, regulatory transparency, market-based commerce, and the freedom to innovate and to have innovations protected") and planning to work together to promote them internationally and protect them from "non-market distortive policies and practices."

With regard to actions they might take for this purpose, the statement mentions "[s]har[ing] information on non-market distortive policies and practices that pose particular challenges for U.S. and EU workers and businesses." It then identifies the following practices:

• "forced technology transfer";
• "state-sponsored theft of intellectual property";
• "market-distorting industrial subsidies, including support given to and through SOEs, and all other types of support offered by governments";
• "the establishment of domestic and international market share targets";
• "discriminatory treatment of foreign companies and their products and services in support of industrial policy objectives";
• "and anti-competitive and non-market actions of SOEs."

Finally, the statement notes that "domestic measures ... can play a critical role" here. To improve the use and effectiveness of such domestic measures, the statement says the parties intend to:

• "Make an inventory of the growing number of domestic measures that the United States and the European Union each already employ, and exchange information on the operation and effectiveness of those measures and on any plans for future measures";
• "[t]o the extent practicable or deemed desirable by both the United States and the European Union, consult or coordinate on the use and development of such domestic measures, with a view to increasing their effectiveness and mitigating collateral consequences for either the United States or the European Union from any such measure developed"; and
• "[e]xchange information on the impact of non-market, distortive policies and practices in third countries and explore ways of working together and with other partners with a view to addressing the negative effects of such policies and practices, which can undermine development goals and have a negative impact on U.S. and EU commerce in those countries."

Although China is not the only non-market economy in the world, and the statement does not mention China by name, China is clearly the main target here. The non-market economy issues raised in the statement have all been discussed in a number of other fora to some extent: multilaterally at the WTO, in disputes,  trade policy reviews, and committees; trilaterally among the U.S., the EU and Japan; unilaterally in the U.S. Section 301 investigation of certain Chinese practices; bilaterally between the U.S. and China in the Phase One trade deal; and bilaterally between the EU and China in the context of the Comprehensive Agreement on Investment.  There has been talk for a while about the possibility of the U.S. and EU intensifying their coordination in this area. It remains to be seen if the TTC can provide an effective mechanism for doing so.

Annex V

Statement on Global Trade Challenges

The United States and the European Union intend to initially focus on the following specific objectives in the Global Trade Challenges Working Group.

Trade Policy Cooperation towards Non-Market Economies (NMEs)

In paragraph 22 of the Joint Statement issued following their June 15, 2021 summit meeting, President Biden, President Michel, and President von der Leyen stated:

“We intend to work cooperatively on efforts to achieve meaningful World Trade Organization (WTO) reform and help promote outcomes that benefit our workers and companies…We intend to seek to update the WTO rulebook with more effective disciplines on industrial subsidies, unfair behavior of state-owned enterprises, and other trade and market distorting practices.”

As a complement to this cooperation, the United States and the European Union intend to focus in the Global Trade Challenges Working Group on responding to the challenges posed by non-market economies cited in the June 15 Joint Statement.

The United States and the European Union, as democratic market economies, share a number of core values, including with respect to human and labor rights, environmental protection, the rule of law, non-discrimination, regulatory transparency, market-based commerce, and the freedom to innovate and to have innovations protected.

We intend to work together in the Global Trade Challenges Working Group to ensure that our trade policies support these and other shared values, including by promoting them internationally and by resisting challenges to these values in global commerce arising from non-market distortive policies and practices.

Among the actions the United States and the European Union intend to take in the Global Trade Challenges Working Group with respect to this objective are the following:

1. Share information on non-market distortive policies and practices that pose particular challenges for U.S. and EU workers and businesses, both across sectors and in relation to specific sectors in which we have identified certain risks, with the goal of developing strategies for mitigating or responding to those policies, practices, and challenges. Non-market practices that raise concerns include – but are not limited to – forced technology transfer; state-sponsored theft of intellectual property; market-distorting industrial subsidies, including support given to and through SOEs, and all other types of support offered by governments; the establishment of domestic and international market share targets; discriminatory treatment of foreign companies and their products and services in support of industrial policy objectives; and anti-competitive and non-market actions of SOEs.

2. The United States and the European Union recognize that domestic measures that each takes on its own can play a critical role in ensuring that trade policy supports market-based economies and the rule of law. This recognition is without prejudice to the views that either of them may have with respect to the appropriateness of any particular measure.

To improve the use and effectiveness of such domestic measures, the United States and the European Union intend to:

1. Make an inventory of the growing number of domestic measures that the United States and the European Union each already employ, and exchange information on the operation and effectiveness of those measures and on any plans for future measures; and,

2. To the extent practicable or deemed desirable by both the United States and the European Union, consult or coordinate on the use and development of such domestic measures, with a view to increasing their effectiveness and mitigating collateral consequences for either the United States or the European Union from any such measure developed.

3. Exchange information on the impact of non-market, distortive policies and practices in third countries and explore ways of working together and with other partners with a view to addressing the negative effects of such policies and practices, which can undermine development goals and have a negative impact on U.S. and EU commerce in those countries.