The transatlantic economy is the largest, most prosperous and most innovative of its kind in the world—and it continues to grow. Foreign direct investment (FDI), the true measure of the EU-US partnership, has reached new heights over the past decade. One measure of the investment relationship—the combined output of US affiliates in the EU and EU affiliates in the US—totalled $1.4 trillion in 2019—more than the output of most countries. In spite of the devastating impact of the global health crisis on the economy, which saw global FDI flows retract by 42% in 2020, the transatlantic partnership maintained its position as the most
important economic artery in the world, accounting for one-third of global GDP in 2020.

In this context, 2021 represents a new dawn for the US and Europe. On the occasion of Joe Biden’s inauguration as President, I called for the US and the EU to reset, refresh and rekindle: reset transatlantic relations by working to resolve longstanding disputes while searching out areas to intensify cooperation; refresh multilateralism by working together on a reform agenda for global institutions; and rekindle EU-US leadership to face down the societal challenges of the day, including climate change; the digital transformation; and a shifting geopolitical power balance.

Transatlantic innovation partners

As this year’s Transatlantic Economy Survey reports, the US and Europe are the primary drivers of innovation. Transatlantic investments in research and development are the largest of any international partners. US affiliates spent $33 billion (approx. €28 billion) on research and development in Europe in 2018, while European affiliates in the US spent $45.1 billion (approx. €38 billion).

This is of particular salience to the pharmaceuticals and healthcare sector, which is one of the most research-intensive sectors in the global economy. The knowledge economy is a huge competitive advantage for both the US and the EU, and one that we must defend. Robust intellectual property protections are a prerequisite to innovation. Existing intellectual property incentives have led Europe to become one of the foremost regions in pharmaceutical innovation, and have helped deliver life-changing treatments for patients. These must be maintained and strengthened in the initiatives stemming from the EU’s Pharmaceutical Strategy for Europe if the EU is to continue to attract investment in its knowledge economy.

Regulatory cooperation partners

Cooperation with the US and other like-minded partners is a key theme in the EU’s new trade strategy. Beyond cooperating to progressively reduce tariffs and non tariff barriers to trade, the two sides should focus their efforts on enhancing regulatory cooperation. As the authors of the Transatlantic Economy 2021 Survey observe, the concoction of challenges that spans COVID-19, the climate and digital transitions and a shifting geopolitical context make enhanced cooperation between regulators in Washington and Brussels compelling, if we want to continue to be rule-makers in future, rather than rule-takers. Regulatory cooperation could be addressed in a separate forum from bilateral market access negotiations. The case for regulatory cooperation is particularly strong in the healthcare and pharmaceuticals sector, as it could serve to reduce time lags between availability of and access to innovative new treatments. As the COVID-19 vaccination drive has demonstrated, time is of the essence when lives and livelihoods are at stake.

Looking to the future

As the 46th President of the United States settles into office, we might afford ourselves a little optimism that better times are on the horizon for the transatlantic relationship. Even in the face of multiple headwinds, our partnership has not broken. The world’s largest and most important bilateral commercial relationship stayed on track. Now, we must double down on our efforts to make the future ours. By focusing on setting global standards, shaping global governance structures and leading the fight for a more sustainable economy, we can ensure prosperity for generations to come.