As the EU and US prepare for the 4th meeting of the EU-US Trade and Technology Council (TTC) in Luleå, Sweden, stakeholders on both sides of the Atlantic are eager to see tangible progress on tackling the many economic, security, environmental and societal challenges our governments face.

 

The EU-US relationship continues to be plagued by trade and policy irritants, such as steel and aluminum or aircraft disputes and accusations of protectionism in the Inflation Reduction Act or EU technological sovereignty policies. Rebuilding a trusted trade relationship between the transatlantic partners remains a work in progress and makes it challenging for the TTC to achieve concrete results when both sides must put time and resources into addressing those irritants by compartmentalizing them in parallel discussions.

 

The TTC has nonetheless made important advances, showcasing broader alignment on shared democratic values, as well as geopolitical and security issues such as Russia’s war in Ukraine. It also launched some important concrete projects, like funding digital infrastructure and setting up an early warning system for greater resilience in the semiconductor supply chains. However, the TTC’s success will not only depend on demonstrating alignment on principles, but also on establishing a “fireproof” economic relationship, one that allows transatlantic trade to concretely generate near and long-term benefits for both the EU and US economies, and ultimately their own citizens.

 

Since the launch of the TTC, IBM has called on both EU and US governments to charter a common path to drive technological innovation, economic growth and job creation in order to generate trust and resilience in the digital economy and address climate crisis. Our commitment to transatlantic trade is the result of our century-long presence on both continents, and the investment and innovation opportunities that our combined markets have brought to American and European businesses over time.

 

If a comprehensive EU-US trade agreement seems currently out of reach, here are three practical trade deliverables we believe both sides can immediately agree on to make the transatlantic economy stronger and more prosperous:

 

1. Discuss transatlantic principles for trustworthy Artificial Intelligence (AI) foundation models

 

The use of AI for international trade is significantly growing. The OECD highlighted AI’s strong potential for greater productivity, better supply chain management and lower trade costs for both the goods and services industry. Existing applications of AI in trade include, for example, automated translation used by e-commerce retailers and their customer services, automated maintenance of assets along the supply chain to detect potential issues and improve the accuracy of manufacturing and delivery, and analytics and risk management tools used by financial institutions in areas such as access to credit, fraud prevention or anti-money laundering compliance.

 

Many such applications rely on the use of what we call “Foundation AI”, which are “re-usable” AI models that can apply information learned in one situation to another situation. By building on top of a foundation model, we can create more specialized and sophisticated models tailored to specific use cases or domains. These models will make AI more accessible and drive its adoption in enterprises. Just like cloud computing democratized access to powerful IT infrastructure and applications to all kinds of businesses, foundation models will allow companies to deploy AI in a wider range of mission-critical situations, improving efficiency productivity and decision making.

 

As with any technology, how AI is used poses some risks, notably if the AI model inherits flaws or biases that may be present in the data they train on, as we have seen recently with ChatGPT. This is where governments have the power to take productive steps to address such concerns through targeted, risk-based, and context-based AI regulation.

 

Last year, the TTC launched a Roadmap for Trustworthy AI to increase cooperation in this area. As both sides plan to extend this work to discuss generative AI systems, there is an opportunity for both sides to find common ground on AI foundation models. IBM recently published a detailed A Policymaker’s Guide to Foundation Models which meaningfully address concerns related to foundation models, to ensure any AI policy framework is risk-based and appropriately focused on the deployers of AI systems. Based on four key principles (promoting transparency; leveraging flexible approaches; differentiating between different kinds of business models; and carefully studying emerging risks), such a framework would provide a common method, while still maintaining legislative freedom. It would also allow the EU and the US to support AI innovation and unleash its benefits for their mutual economies, while protecting their societies from potential risks, ensuring the use of these technologies is driven by shared transatlantic values.

 

 

2. Leverage existing digital tools and standards to remove transatlantic trade friction

 

Digital technologies play a critical role in cross-border business negotiations and transactions, notably electronic payment technologies and infrastructure, e-signatures and electronic contracts and invoicing. Those might sound like purely administrative matters, but e-invoices, which are still underutilized in international trade transactions, can bring significant, broader economic benefits, including shortening invoice processing and payment cycles,lessening the risk of human error and invoice fraud, cutting transaction costs, improving business efficiency and helping governments tackle tax fraud. Overall, e-invoices make it easier for all sizes of businesses to trade globally.

 

Governments play a key role in the adoption of e-invoices: for example, the EU has been a global leader since the launch of the Peppol (Pan-European Public Procurement Online) network in 2012 and the implementation of the 2014 Directive on Electronic Invoicing in Public Procurement, which introduced a common e-invoice standard, ensuring semantic interoperability and improving legal certainty. Peppol is a set of specifications, compliant with international standards, that allows participating organizations to securely exchange electronic business documents, such as purchase orders and invoices, across its virtual network, no matter the IT systems or the Peppol provider used to access it.

 

Originally intended for e-procurement, its open, interoperable and technology-neutral nature, as well as its ability to be tailored to regulatory, customs, tax, or sector specificities, has led to wider adoption in both B2B and B2G environments, and beyond European countries to include Singapore, Australia, New Zealand, Japan and Malaysia. Its governing nonprofit authority, OpenPeppol, has now 42 member countries and has registered more than 130 million transactions in 2020.

 

Norway, one of the leading Peppol adopters, made Peppol mandatory for all public contracts in 2011, and estimated that the use of B2G and B2B e-invoicing could generate savings of NOK2.8bn [€241m, $262m] of cost savings per year.

 

In the US, the Business Payments Coalition and the Federal Reserve have launched a Peppol-inspired system (DBNA – Digital Business Networks Alliance), which is limited to US domestic trade, and whose parameters are not interoperable with Peppol for international transactions. Moreover, there are almost no providers that can deliver e-invoicing solutions to use on this network (while Peppol has 350+ certified service providers, including many SMEs, that can offer such service).

 

The TTC could be an ideal platform to launch a transatlantic Peppol initiative, aiming at aligning the nascent US e-invoicing system toward Peppol. OpenPeppol has the expertise and capabilities to map US regulatory or tax specificities in order to adapt Peppol to US demands, as already done for Singapore or Japan. By adopting Peppol on both sides of the Atlantic, EU and US businesses could achieve critical economies of scale through better B2B and B2G market access and regulatory compatibility. This would also make the transatlantic supply chain more integrated, competitive and resilient, and remove global trade barriers to generate more growth.

 

 

3. Create a transatlantic climate data space, starting with common standards for carbon accounting and measurement.

 

Increased transatlantic cooperation on the transition to a more green and circular economy is rightfully taking center stage in TTC discussions, given both sides’ ambitions in tackling the global threat of climate change. Promoting sustainable trade is welcomed, and particularly the commitment on both sides to resolves differences and tensions on the IRA. Yet it is critical the EU and US move forward and not let such disputes derail the overall objective.

 

One practical way to achieve this is to advance the conversation around common transatlantic standards for carbon accounting and measurement, and specifically how digital technologies and platforms powered by emerging technologies like AI can support and enable such measurement.

 

While having the right environmental regulatory framework, such as setting emissions standards, is important, there are other pragmatic ways for governments to encourage the shift to decarbonization, notably by addressing some of the key barriers such as the lack of quality environmental data. For example, better data about corporate Greenhouse Gas (GHG) emissions is an invaluable tool to inform companies how they can improve the efficiency of their operations and best reduce such emissions.

 

Digital solutions can offer powerful reporting and analytics platforms to deliver transparent, verifiable, and high-quality data and insights. These platforms, powered by AI tools, can be used by many stakeholders — businesses, regulators, researchers, and investors. Paired with smart, targeted emissions disclosure requirements, firms will be able to report emissions transparently in a standardized format, providing governments with a more accurate view of GHG emissions.

 

The TTC is the right forum to start an initiative around common standards for carbon accounting and measurement, together with relevant stakeholders, building on the work done by the European Green Digital Coalition.  This initiative should focus on adopting common methodologies on how to find efficiencies in the supply chain, and increase efforts to reduce GHG emissions worldwide. This would significantly increase the transparent sharing of carbon data and support the establishment of a transatlantic climate data space, a prerequisite to ensure the deployment of clean technologies to drive the energy transition.

 

It goes without saying that a speedy finalization of the EU-US Data Privacy Framework and the removal of barriers to the sharing of non-personal data across borders, for example in the EU Data Act, are a necessary condition to enable such data space.

 

Deepening transatlantic trade to deliver concrete economic benefits for both the EU and the US is an ambitious goal that comes with significant challenges, but it will be the key ingredient to make a framework like the TTC a success. Next year, both sides will face critical elections, and we have seen in the past how the results can significantly affect the transatlantic relationship: the window of opportunity for desired action is now.

 

 

 

 

-Amelie Coulet, Senior Manager, IBM Government and Regulator Affairs, Europe

 

 

 

 

 

 

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