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I then realized two things. First, the concept of innovation defines our age. It fuels the global economy, promises a sustainable future, and stands at the heart of our interconnected society. Not only was the underground surrounded with all kinds of innovations, but we have even reached a point in history where people are reading about innovation and – as the commuter would later confess – dream of becoming innovators themselves, for public icons like Steve Jobs and Elon Musk are praised in the same way artists and scientists were in previous times. Second, the concept of innovation is widely presupposed in terms of the commercial value it generates. In this view, innovation is only considered valuable insofar customers are willing to pay for it. As claimed in the tradition of economic analysis, innovation is characterized by its competitive dynamics and is primarily directed at developing marketable products and services (Stoneman 1995).

At the same time, our geopolitical landscape faces an unprecedented crisis, overwhelmed with global issues such as climate change, overpopulation, water shortage, a loss of biodiversity, food security, and the more recent COVID-19 pandemic. The reality of these issues increasingly urge innovation to generate societal value beyond mainstream economic incentive. This is particularly the case in the context of the European Union (EU), which strives to represent high ethical standards on the world stage and thus prioritizes normative objectives on its political agenda. To this end, the EU policy discourse has paved the way for Responsible Innovation (RI). The core idea here is to steer innovation processes towards societally desirable outcomes, specifically in response to the so-called grand challenges of our time (European Commission 2015). A frequently cited and particularly influential definition of RI calls for “a transparent, interactive process by which societal actors and innovators become mutually responsive to each other with a view on the (ethical) acceptability, sustainability and societally desirability of the innovation process and its marketable products” (von Schomberg 2013, p. 63). Under the sway of science with and for society, the hypothesis is that innovation can only respond to the needs and ambitions of society by including all its actors throughout the process. As such, in 2011, RI made its entry by the name of Responsible Research and Innovation (RRI) as a cross-cutting issue under the EU Framework Program for Research and Innovation ‘Horizon 2020’. More recently, RRI has been articulated in terms of six keys – ethics, societal engagement, gender equality, open science, science education, governance – through which the EU imposes a strong normative view of what constitutes responsibility in innovation processes (European Commission 2020).

In the wake of the recent The New York Times vs. Microsoft/OpenAI lawsuit, a statement from OpenAI stirred the pot in the ongoing debate over artificial intelligence (AI) and copyright laws. OpenAI posited that it is virtually impossible to train today’s leading AI models without infringing copyrighted materials. This declaration prompts a reconsideration of how to balance the needs of technological innovation with copyright.

OpenAI’s recent admission underscores a fundamental reality in AI’s development: AI needs data, and by extension, access to copyrighted material is indispensable for its growth and evolution. That said, this necessity need not be conflated with copyright infringement. According to U.S. copyright law, copyright protection does not extend to the “idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” This means that copyright law guards the expression of ideas, rather than the ideas themselves.

Generative artificial intelligence is driving copyright into a crisis. More than a dozen copyright cases about AI were filed in the United States last year, up severalfold from all filings from 2020 to 2022. In early 2023, the US Copyright Office launched the most comprehensive review of the entire copyright system in 50 years, with a focus on generative AI. Simply put, the widespread use of AI is poised to force a substantial reworking of how, where, and to whom copyright should apply.

Starting with the 1710 British statute, “An Act for the Encouragement of Learning,” Anglo-American copyright law has provided a framework around creative production and ownership. Copyright is even embedded in the US Constitution as a tool “to promote the Progress of Science and useful Arts.” Now generative AI is destabilizing the foundational concepts of copyright law as it was originally conceived.

It’s increasingly evident that bright futures for both journalism and generative artificial intelligence (Gen AI) hinge on copyright law, licensing agreements, and high levels of cooperation between content creators and technology innovators. The New York Times Company’s December lawsuit against Microsoft and OpenAI highlights this reality and, as I previously described, the ramifications for a well-informed citizenry are profound.

Testimony during a January congressional hearing on “Oversight of A.I.: The Future of Journalism” reinforces this. Roger Lynch, CEO of magazine publisher Condé Nast, bluntly told the Senate Judiciary Committee’s subcommittee on privacy, technology, and the law that “Gen AI cannot replace journalism. It takes reporters with grit, integrity, ambition, and human creativity to develop the stories that allow free markets, free speech, and freedom itself to thrive.” In short, without journalism, the informational ecosystem that renders possible the benefits of Gen AI (and will likely generate billions of dollars for its investors) collapses. That’s because Gen AI’s large language models (LLMs) are typically trained on human-created, copyrighted content.

Requiring tech companies to license the use of news publishers’ content through this type of legislation would help ensure that smaller, local, niche, and non-English language news publishers would also be able to negotiate for the use of their content and data. This type of journalism could be particularly useful for localizing generative search, summarization, content creation, and other applications that make use of journalism to provide more accurate, timely, and relevant results, particularly in languages other than English.

Journalism can also be an important source of data for improving the quality of foundation models, which suffer from bias, misinformation, and spam that make access to diverse sources of quality, factual information, especially in low-resourced digital languages, even more valuable. Furthermore, as the quality of data becomes as important as the quantity of data, journalism provides a constant source of new, timely, human-generated data.

The most obvious response to the ill winds blowing from the world’s autocracies is to help the winds of freedom blowing in the other direction. The democracies of the West cannot save themselves if they do not stand with democrats around the world. This is truer now than ever, for several reasons. We live in a globalized world, one in which models, trends, and ideas cascade across borders. Any wind of change may gather quickly and blow with gale force. People everywhere form ideas about how to govern—or simply about which forms of government and sources of power may be irresistible—based on what they see happening elsewhere. We are now immersed in a fierce global contest of ideas, information, and norms. In the digital age, that contest is moving at lightning speed, shaping how people think about their political systems and the way the world runs. As doubts about and threats to democracy are mounting in the West, this is not a contest that the democracies can afford to lose. Globalization, with its flows of trade and information, raises the stakes for us in another way. Authoritarian and badly governed regimes increasingly pose a direct threat to popular sovereignty and the rule of law in our own democracies. Covert flows of money and influence are subverting and corrupting our democratic processes and institutions. They will not stop just because Americans and others pretend that we have no stake in the future of freedom in the world. If we want to defend the core principles of self-government, transparency, and accountability in our own democracies, we have no choice but to promote them globally. It is not enough to say that dictatorship is bad and that democracy, however flawed, is still better. Popular enthusiasm for a lesser evil cannot be sustained indefinitely. People need the inspiration of a positive vision. Democracy must demonstrate that it is a just and fair political system that advances humane values and the common good. To make our republics more perfect, established democracies must not only adopt reforms to more fully include and empower their own citizens. They must also support people, groups, and institutions struggling to achieve democratic values elsewhere. The best way to counter Russian rage and Chinese ambition is to show that Moscow and Beijing are on the wrong side of history; that people everywhere yearn to be free; and that they can make freedom work to achieve a more just, sustainable, and prosperous society. In our networked age, both idealism and the harder imperatives of global power and security argue for more democracy, not less. For one thing, if we do not worry about the quality of governance in lower-income countries, we will face more and more troubled and failing states. Famine and genocide are the curse of authoritarian states, not democratic ones. Outright state collapse is the ultimate, bitter fruit of tyranny. When countries like Syria, Libya, and Afghanistan descend into civil war; when poor states in Africa cannot generate jobs and improve their citizens’ lives due to rule by corrupt and callous strongmen; when Central American societies are held hostage by brutal gangs and kleptocratic rulers, people flee—and wash up on the shores of the democracies. Europe and the United States cannot withstand the rising pressures of immigration unless they work to support better, more stable and accountable government in troubled countries. The world has simply grown too small, too flat, and too fast to wall off rotten states and pretend they are on some other planet. Hard security interests are at stake. As even the Trump administration’s 2017 National Security Strategy makes clear, the main threats to U.S. national security all stem from authoritarianism, whether in the form of tyrannies from Russia and China to Iran and North Korea or in the guise of antidemocratic terrorist movements such as ISIS.1 By supporting the development of democracy around the world, we can deny these authoritarian adversaries the geopolitical running room they seek. Just as Russia, China, and Iran are trying to undermine democracies to bend other countries to their will, so too can we contain these autocrats’ ambitions by helping other countries build effective, resilient democracies that can withstand the dictators’ malevolence. Of course, democratically elected governments with open societies will not support the American line on every issue. But no free society wants to mortgage its future to another country. The American national interest would best be secured by a pluralistic world of free countries—one in which autocrats can no longer use corruption and coercion to gobble up resources, alliances, and territory. If you look back over our history to see who has posed a threat to the United States and our allies, it has always been authoritarian regimes and empires. As political scientists have long noted, no two democracies have ever gone to war with each other—ever. It is not the democracies of the world that are supporting international terrorism, proliferating weapons of mass destruction, or threatening the territory of their neighbors. For all these reasons, we need a new global campaign for freedom. Everything I am proposing in this book plays a role in that campaign, but in this chapter, I am concerned more narrowly with the ways that we can directly advance democracy, human rights, and the rule of law in the twenty-first-century world. As with any policy area, many of the challenges can be somewhat technical, requiring smart design and the careful management of programs and institutions. Those operational debates I leave for another venue. Here, I make a more basic case for four imperatives. First, we must support the democrats of the world—the people and organizations struggling to create and improve free and accountable government. Second, we must support struggling and developing democracies, helping them to grow their economies and strengthen their institutions. Third, we must pressure authoritarian regimes to stop abusing the rights and stealing the resources of their citizens, including by imposing sanctions on dictators to make them think hard about their choices and separate them from both their supporters and the people at large. Finally, we need to reboot our public diplomacy—our global networks of information and ideas—for today’s fast-paced age of information and disinformation. For the sake of both our interests and our values, we need a foreign policy that puts a high priority on democracy, human rights, and the rule of law.

A recent Washington Post article about artificial intelligence (AI) briefly caught the publics’ attention. A former engineer working for Google’s Responsible AI organization went public with his belief that the company’s chatbot was sentient. It should be stated bluntly: this AI is not a conscious entity. It is a large language model trained indiscriminately from Internet text that uses statistical patterns to predict the most probable sequence of words. While the tone of the Washington Post piece conjured all the usual Hollywood tropes related to humanity’s fear of sentient technology (e.g., storylines from Ex Machina, Terminator, or 2001: A Space Odyssey), it also inadvertently highlighted an uncomfortable truth: As AI capabilities continue to improve, they will become increasingly effective tools for manipulating and fooling humans. And while we need not fear an imminent cyborg apocalypse, we do need to prepare and strategize for a new era of AI-enabled disinformation.

Disinformation operations — covert efforts to deliberately spread false or misleading information — have historically been a distinctively human endeavor. With the rise of instantaneous digital communications, malign actors have increasingly exploited the machine learning systems embedded in our daily lives to precisely target audiences, shape global public opinion, and sow social discord. Today, disinformation operators are expanding their manipulation toolkits to include new AI techniques. AI-generated synthetic media and convincing AI-enhanced chatbots now offer threat actors a growing array of persuasive, tailored, and difficult-to-detect messaging capabilities. While machine learning techniques can also be used to combat disinformation, they will likely remain insufficient to counterbalance the expanding universe of anonymous digital mercenaries. Unless liberal democracies develop whole-of-society counter-disinformation strategies, AI-enhanced disinformation operations will further exacerbate political polarization, erode citizen trust in societal institutions, and blur the lines between truth and lies.

Dis/misinformation is the most immediate global risk of the next two years, according to a recent survey of global policy-makers, private sector leaders and risk experts. False information and conspiracy theories are a ‘global menace’.

Multiple media and advocacy bodies (e.g. here and here) suggest that artificial intelligence (AI) could supercharge disinformation. The conjunction of generative AI – enabling more and better-targeted false information – political polarisation and dissatisfaction with democracy appear to be creating a perfect storm.

Can humanity survive digitally enhanced psychological warfare?

No matter where you live, if you are on the Internet you are in a war zone. You may not feel the terror of bombs dropping around you, nor the horrors of physical violence, but there is war nonetheless. For as long as humans have fought, military tactics have always involved propaganda, information manipulation, and deception. Today, digital communication technologies have changed the landscape of what the U.S. military calls “irregular warfare.”[1] As opposed to “conventional warfare,” this kind of war is not primarily about the use of physical force, and it is not primarily about targeting an adversary’s military assets. Irregular warfare includes economic warfare (sanctions), cyber warfare (attacks within the digital domain), and political warfare (diplomacy), but it most pervasively manifests as some version of population-centric information and narrative warfare. The goal is the same as conventional war: to acquire by coercive means some political or strategic good, such as economic, geographical, or military advantage. In this kind of war, the mind of every citizen is a potential target, and tactical victories could include a delegitimized election, implosions of civic discourse, and mutual hatred sparked between fellow citizens.

Can journalism survive artificial intelligence (AI)? The answer will depend on whether journalism can adapt its business models to the AI era. If policymakers intervene to correct market imbalances, they must enforce intellectual property rights and ensure that journalism has a fighting chance in the era of generative AI.

Over the past nearly two decades, as tech companies like Apple, Amazon, Google, Meta, and Microsoft grew to become some of the most valuable companies in the world, the United States lost a third of its newspapers and two-thirds of its newspaper journalists. They cannot be replaced with AI.

Last year, after Buzzfeed laid off its entire newsroom and made a pronounced pivot to AI-generated content, I made the argument that journalists should treat the technology as an existential threat. It seemed clear that companies like OpenAI were creating content-generating algorithms that could be used to compete with traditional (read: human) reporters. I added the qualification that I might, potentially, be indulging in alarmism. It was early days and, just because it seemed like AI could prove a big problem for the news industry, that didn’t mean that things would necessarily pan out that way.

Since then, however, nothing has particularly happened to soften my stance. More and more, it seems like the journalism industry is under threat from a technology that is intent on using content created by humans to replace them.

Other analysts have sounded a much less alarmist tone, however. Some scholars even suggested that an Iranian bomb held great potential for stabilising an unbalanced and volatile Middle East (Waltz, 2012). Closer to the mainstream of Western strategic discourse, various experts have argued that despite the risks of proliferation, nuclear weapons, and the deterrent they provide should get (more) credit for contributing, in combination with other factors, to what has been labelled ‘the Long Peace’ among the great powers since 1945 (Gaddis, 1999, p. 268–271; Gavin, 2012a, p. 164; Acton 2010, pp. 16–17). Still others have contended that because nuclear proliferation is such a rare phenomenon, and since robust nonproliferation measures tend to be disruptive, the net destabilising effect of new nuclear countries is quite small and, therefore, manageable (Mueller 2010, pp. 95–99; Hymans 2013, pp. 293–296).

The question of whether nuclear proliferation has stabilising or destabilising effects is not just fascinating for scholars of the nuclear age, but also highly consequential for practical policy issues. For in order to debate the merits of particular policy choices – such as preventive military strikes against nuclear facilities, grand bargains with potential proliferators or complete nuclear disarmament – we need to understand first how the spread of nuclear weapons impacts regional and global security.

Superficially, the EU seems to have made great progress since the 1957 Treaty of Rome. Almost every aspect of policy is now determined by bureaucrats in Brussels in combination with the European Council and the European Parliament. The EU even has its own foreign service and is struggling to create its own intelligence and federal police services. No wonder it impresses Arabs and Africans, whose own struggles for unity have, relatively speaking, gone nowhere. The trouble, however, is that the EU as a whole is in absolute demographic decline and relative economic and technological decline, and its major policies — whether the common fisheries and agriculture policies or the euro and monetary union — have failed. In terms of foreign and security policies, it is an international joke. It spends next to nothing on defense, and even its main contributors in this area, Britain and France, have seen their armed forces so severely cut recently that in the Libyan war, where Europe "took the lead," they were entirely dependent on U.S. logistics and supplies. If the EU boasts of its reliance on "soft power," that is because it has no choice. Its head of foreign affairs, the British baroness Catherine Ashton, has been called "the world’s highest-paid female politician," yet she remains anonymous and has no influence on world events whatsoever. Her position sums up everything that is wrong with the EU — expensive but ineffective. The fundamental problem with the EU, however, is that the people of Europe have no faith in it and do not identify with it. A 2010 Eurobarometer poll found that only 49 percent of EU citizens think their country’s EU membership is a "good thing," while only 42 percent trust EU institutions. Meanwhile, those institutions, like the EU’s whole ethos, are positively anti-democratic. Its key decision-making bodies — the European Council, Court of Justice, and European Commission — are, for all practical purposes, unelected, unaccountable, and removed from the people (commissioners are usually washed-up has-beens whose political careers in their home states have ended in failure). Their decisions are irreversible in national parliaments, and the European Parliament, while vested with powers of co-decision-making with the European Council, is also remote. The Parliament is a glorified debating society — not a government with an official opposition — and its parties cannot promise any fundamental policy changes in their election manifestos; indeed, its election outcomes rarely have an impact on the course of EU politics. Its members are unknown and despised as opportunists who merely seek inflated salaries, perks, expenses, and pensions. Voter turnout in the EU’s parliamentary elections is low and falling, reflecting the widely held belief among EU citizens that the EU doesn’t protect or represent their interests. One of the most egregious examples of the lack of democracy in the EU is the practice of making small states that vote "no" in EU referenda vote again. Denmark had to vote twice on the Maastricht Treaty, while Ireland was forced to go two rounds on the Nice Treaty and the Lisbon Treaty. Big states are not immune from this kind of bullying treatment, either. When voters in France and the Netherlands rejected an EU constitution in 2005, European leaders tweaked about 4 percent of the original wording, renamed the document the Lisbon Treaty, and then rammed it through the French and Dutch parliaments despite the popular votes. When then Greek Prime Minister George Papandreou suggested a referendum on the Greek bailout last year, he was maneuvered out of office within days. The EU does not believe in the tolerant British saying, "When in Rome, do as the Romans do." Instead, its policy is, "When in Rome, do as the Germans do." Altogether, the outlook in Brussels and Berlin is like that of Napoleon in George Orwell’s Animal Farm: "He would be only too happy to let you make your decisions for yourselves. But sometimes you might make the wrong decisions, comrades, and then where should we be?" The official German attitude is summed up by the regular fury from German politicians and the German media whenever an EU country calls for a referendum on initiatives from Brussels. When Ireland announced in February that it would hold a referendum on the EU’s new fiscal treaty, Der Spiegel marveled, "The Irish Again!" while Süddeutsche Zeitung declared that if the Irish fail to realize that the fiscal pact "is in their national interest," Germany "will not be able to help them." Perhaps nothing captures Germany’s elitist attitude better than an essay last summer in Der Spiegel by German political scientist Herfried Münkler titled, "Democratization Can’t Save Europe: The Need for a Centralization of Power." Münkler argues that elections and referenda cannot be trusted in Europe because "the European population has never been and still is not a European people." EU elites, he adds, "need to improve — and power has to be taken away from the periphery." Can you imagine a leading U.S. magazine printing such stuff about American elites and voters in certain states? But this is exactly what is happening in Europe today. Power is being taken away from the periphery by centralizing elites. But these elites are failing. The EU’s key policy — monetary union — has been a disaster. The simple fact is that you cannot have a successful monetary union without a political and fiscal union, with monetary transfers between rich and poor areas legitimized by democratic institutions. (In a currency union of disparate economies where changes of interest and exchange rates are forbidden to members, weaker economies have no means of competing with stronger ones if there is no legal arrangement for democratic agreement among members that stronger economies will bail out weaker ones when they get into debt.)

The European Project looks in trouble once again. Mounting political extremism, feeble growth and the loss of its second largest economy shape a convincing case that the integration of Europe’s political and economic institutions has failed to deliver. The common currency, it appears, has created more mutual resentment among its members than mutual solidarity, and the calls for more exits has led many to conclude it was all a terrible mistake. And yet, it survives and in many ways prospers. The reinforcement of euro area institutions following a sudden stop in global financial flows suggests a surprising resilience. Indeed, the euro as a store of value did not suffer directly from the crisis. And for all the gnashing of teeth, euro area governments were forced to double down on their commitments to one another under the skeptical watch of global financial markets. Even in the face of certain voter rebellion, they opted for measures for integration rather than separation or dissolution. For a project that is perennially on the verge of collapse, it is worth re-examining how these leaders committed significant sums of taxpayer resources and agreed to an unprecedented sharing of sovereignty.¶ This paper argues that the resilience comes from the deep financial integration of the currency union that created both stronger links of interdependence among its members as well as greater flexibility to absorb shocks. On the one hand, the financial market turmoil made it painfully clear to European leaders that investors viewed Europe as more or less a single borrower notwithstanding a treaty that said otherwise. On the other hand, this integration, especially through the banking system, provided mechanisms to reallocate resources throughout the currency union in order to absorb the asymmetric hocks through liquidity injections, market purchases and the euro area payments system. Like the large noisy family they claim to be, European leaders found themselves stuck with the costs of their relatives’ mistakes, yet able to reallocate emergency resources under the table even as they sought to set up formal new rules to provide support and enforce discipline. If there is an optimistic case to be made for the euro area, it may be that strengthening its Banking Union can proceed even as the political climate makes structural reforms, fiscal pooling or labor mobility more difficult.2 Moreover, financial market forces may encourage progress on banking supervision and stability in spite of lingering voter doubts. Arguably, the European political calendar over the next year will put these ideas to their most severe test yet in key national elections. Until now, however, the “Financial Education of the Eurozone” is both the story of global markets forcing political leaders to take unpalatable steps to reinforce their monetary union, and the dawning realization that this very interdependence through markets and banks will likely drive further integration. Steady progress on the technical steps required to enshrine Banking Union and capital market integration may not be sufficient to secure the euro’s long-term survival, but they are necessary and realistic next steps amid the current political turmoil.¶ Europe still falls far short on key elements of what constitutes an “optimum currency union” (Mundell 1961; McKinnon 1963; Kenen 1969). Roughly summarized, economists have cited four key criteria to achieve optimality: factor mobility, including especially capital and labor, pooling of fiscal responsibility and synchronization of business cycles. Moreover, the political will to accept the economic policies of other members can make or break a currency union (Frankel 2004). While capital mobility has been relatively free within the euro area--and this paper argues crucial in keeping the common currency together--labor mobility has been more constrained. The absence of a common language seems to be a detail that many early champions of the common currency assumed away. As for fiscal integration, of course, the euro area has no central fiscal authority, with the EU budget itself representing only 1 percent of gross domestic product. On business cycles, while Europe’s commercial links were deep, it became clear from the emerging imbalances that these economies were hardly synchronized.3 These failures, in the context of a single currency, have substantially slowed the European recovery such that only in 2014 had it returned to its levels of output before the crisis.4 As for political will, even the successful summits have often come amid sniping and threats. Arguably, the costs of membership have rapidly surged to exceed the potential benefits.5¶ Indeed, the classic cyclical shock to a monetary union tips some member states into recession and opens disparities in growth rates and unemployment levels that are then locked in by a single currency. With other parts of the union relatively unaffected, there is no incentive to make the difficult decision to share resources for more than humanitarian needs. This leaves the only path of adjustment through a grinding nominal decline in wages and prices that triggers recriminations, populism and ultimately the decision to exit. In the case of the global financial crisis, the shock to Europe revealed very different problems in different places: a fiscal gap in Greece, a property bubble in Ireland, low growth in Portugal and myriad banking issues in Spain, Italy and Cyprus Left to fester individually, none of these disparate problems would have forced a significant response from other European members, either in terms of new rules to bolster better policy or new money to soften the pain of adjustment. As such, it is not difficult to imagine a much more turbulent series of events that included more than one euro member exiting the union¶ What early observers saw less clearly, however, was the surprising integration and interdependence of the member states through financial markets and their banking systems.6 If trade and investment did not flourish as promised, the single currency did open enormous opportunities in banking and finance. Banks rapidly expanded their exposures to other euro markets in search of higher returns where currency risk had apparently disappeared.7 This led to European economies that were both more integrated with one another and at the same time more susceptible to one another’s risks. Thus did isolated national issues like Greek public payrolls and Irish overbuilding suddenly become everyone’s problem. Each of these qualitatively different economic imbalances was quickly transmitted as large, undifferentiated potential losses through the financial system. Some of these potential losses arose from direct lending by French and German banks, for example, to the periphery. Some appeared from nowhere as suspicion turned to fear that much larger countries like Spain and Italy might lose market access. In any case, the sudden transmission of the global shock throughout the European financial system forced European leaders to pool resources and share sovereignty in ways that would have been unimaginable before the crisis. Whenever the price of further pooling of sovereignty and resources looked unacceptably high, euro governments determined that the costs of dissolution would be even higher and could not be compartmentalized. Indeed, most leaders chose policies that eventually lost them their own jobs over the prospect of immediate financial calamity.8¶ This study reviews the historical and political context that shaped European monetary union through the financial crisis, and then traces how unexpected financial market pressures forced European leaders to sweep aside treaty restrictions in order to build a joint fiscal backstop and consent to active central bank intervention on their joint accounts. A third section explores the efforts to encourage, and at times impose, structural reforms, which created a framework to address the currency union’s structural imbalances, even if its credibility remains dubious. Fourth, the study examines the financial interdependence of the currency union that, for all the concerns about fiscal transfers, actually provided a mechanism for financial transfers that helped absorb the shocks. At the same time, these deep financial linkages also made each member vulnerable to the instability of the others and prompted euro governments to impose unprecedented centralized supervision on their own largest banks. In a fifth and final section, this paper assesses the resilience of what must for the foreseeable future remain a “suboptimum currency union” and suggests a policy agenda to secure the recent gains. While further fiscal integration or structural reforms that boost labor mobility may be difficult to imagine short of another crisis, steady and quiet progress on banking union may still be possible. The outcomes are hardly inevitable, as political leaders could miscalculate and voter moods could sour further. Competitive adjustments and structural reforms do not immediately boost growth, which creates fertile ground for populism and isolationism. 9 Still, the lesson of the last several years suggests that members of the euro area must either hang together or hang separately. Ironically, perhaps, the same integration through financial markets and banks that makes members of Europe’s currency union vulnerable to one another also makes the entire structure more likely to endure. As one journalist put it, Europe finds itself in an unhappy marriage with prohibitive divorce costs (Walker 2016)

BRUSSELS/WASHINGTON, June 15 (Reuters) - The United States and European Union will pledge closer cooperation on fighting climate change at a summit on Tuesday, but will steer clear of setting a date to stop burning coal, according to a draft joint statement. U.S. President Joe Biden will meet the chief of the European Union’s executive, Ursula von der Leyen, and European Council President Charles Michel on Tuesday for a summit tackling issues from trade to the COVID-19 pandemic. The meeting marks the return of EU-US collaboration on fighting climate change, after former President Donald Trump pulled the United States out of the Paris Agreement and rolled back environmental regulations. The United States and EU are the world’s second- and third- biggest emitters of CO2, respectively, after China. A draft of their summit statement, seen by Reuters, outlines plans for a transatlantic alliance to develop green technologies, and points to sustainable finance as an area for closer transatlantic collaboration. The EU and United States will also “scale up efforts” to meet an overdue spending pledge of $100 billion a year by rich countries to help poorer countries cut carbon emissions and cope with global warming, the draft said. It did not include firm promises of cash. Canada and Germany both pledged billions in new climate finance on Sunday, and campaigners had called on Brussels and Washington to do the same. The United States pledged in April to double its climate funding by 2024 from high average levels hit during the Obama administration of roughly $2.8 billion. The EU and its member countries are, taken together, the biggest provider of climate finance to developing countries, contributing 21.9 billion euros in 2019. The draft EU-US statement echoed a statement made by G7 leaders this weekend, which pledged to stop government financing for international coal plants without carbon capture technology by 2022 and also stopped short of setting a date to quit coal, the most polluting fossil fuel and the single biggest cause of greenhouse gas emissions. Brussels and Washington said they will largely eliminate their CO2 emissions from electricity production by the 2030s. While Biden set an executive order setting a goal for net zero emissions in the US electric sector, U.S. Democrats and Republicans are at odds over whether to include a measure to enact that goal in an infrastructure package that is being debated in Congress, worrying environmental groups. “It’s a minimal expectation that the Biden administration does everything it can and use all the tools at its disposal,” said Nat Keohane, international climate director at the Environmental Defense Fund. “That will take some political capital and creativity.” (Reporting by Kate Abnett, additional reporting by Valerie Volcovici Editing by Marguerita Choy)

On May 16, 2022, senior officials from the United States and the European Union concluded the second meeting of the US-EU Trade and Technology Council (TTC) in Paris-Saclay, France. US Secretary of Commerce Gina Raimondo, US Trade Representative Katherine Tai, European Commission Executive Vice President Margrethe Vestager, and European Commission Executive Vice President Valdis Dombrovskis led the meeting as Co-Chairs of the TTC. Following the meeting, the parties issued a Joint Statement that outlines the progress of the TTC and its ten working groups since last autumn, as well as plans for future cooperation on issues such as critical supply chains, technology standards, export controls, climate, and unfair trade practices. In keeping with the TTC's status as forum for consultations, rather than the negotiation of binding legal outcomes, the initiatives described in the Joint Statement focus primarily on expanding information sharing between the two governments, articulating shared principles and concerns, working to voluntarily harmonize standards and approaches where possible, and advancing shared interests on a global basis. Among other things, the Joint Statement broadly affirms the participants' intentions to "continue to oppose actors who threaten the multilateral rules-based order and fundamental principles of international law," and to continue "coordinating our actions to mitigate the negative impacts of Russia's aggression against Ukraine[.]" With respect to trade, the participants have committed to "intensify our work to resolve trade disagreements to our mutual advantage, reduce unnecessary barriers to bilateral trade and investment, and strive to prevent new ones from emerging[.]" The parties also recognize "the need to reform the WTO," and to take "effective action to address trade-distortive non-market policies and practices." Beyond these general principles, the Joint Statement incorporates reports from the TTC's ten working groups outlining progress on specific issues. Some of the most notable outcomes and commitments documented by the working groups include the following: Technology Standards Recognizing that the establishment of "better aligned and interoperable technology standards" would facilitate trade, this working group seeks to foster the development of such standards and to "reduce non-tariff barriers in key technology areas[.]" Accordingly, as of May 16, 2022, the US and EU have established a "Strategic Standardisation Information" ("SSI") mechanism with the aim to "encourage engagement in new standardization opportunities" and "explore taking coordinated action if standardization activities pose a challenge to US-EU strategic interests and values." The working group is also developing a list of critical and emerging technologies that it will prioritize in its efforts coordinate technology standards. Such technologies include additive manufacturing, megawatt charging systems for heavy-duty recharging points, recycling of materials, "digital identity," and "Internet of Things." Global Trade Challenges The working group on global trade challenges has focused on four general areas: (1) avoiding unnecessary trade barriers; (2) cooperation on "non-market policies and practices;" (3) trade and labor; and (4) trade and environment. Notable outcomes and commitments in these areas include the following: Avoiding unnecessary trade barriers. The parties will seek to facilitate trade by (1) exploring the use of digital tools for regulatory approvals and conformity assessments; (2) identifying specific areas or products where cooperation on conformity assessment could facilitate trade; (3) expanding cooperation in the area of government procurement; (4) identifying measures that will facilitate trade with Ukraine; and (5) seeking to avoid "unintended consequences of domestic requirements that could create unnecessary barriers to trade and investment, notably for critical products/areas[.]" Cooperation on "non-market policies and practices." The parties plan to develop "joint or coordinated strategies, using available policies and tools," aimed at countering the impact of "non-market, trade-distortive policies and practices" on technological development and competitiveness in key sectors, such as medical devices. Additional sectors may be prioritized in the future. When using domestic tools to address unfair practices, the United States and the EU "will seek to consult or coordinate with each other, with a view to avoiding or mitigating unintended consequences for each other, where possible." Labor. The parties intend to collaborate on the promotion of internationally recognized labor rights in global supply chains, mostly through the exchange of information on best practices (e.g., for combatting forced labor) and work in multilateral fora. They have also announced the establishment of a new tripartite trade and labor dialogue ("TALD"), involving relevant representatives of the US Government, the European Commission, and US and EU trade unions and businesses. Environment. The parties intend to "take a leading role in using trade policy and tools to support climate and environmental policy goals[.]" In addition to exchanging information, they have agreed that these efforts should include cooperation on the implementation of the WTO statement on the Trade and Environmental Sustainability Structured Discussions. Such efforts will focus on (1) enabling a "trade facilitative approach" to remanufacturing, refurbishment, repair, and direct reuse; and (2) "fostering better understanding of the role of trade" in disseminating goods and services to meet environmental and climate goals. Climate and Clean Tech The climate and clean tech working group is focused on three main areas: (1) promoting green public procurement policies; (2) aligning methodologies for calculating the carbon footprint of selected products, and (3) advancing electro-mobility and interoperability with smart grids. With respect to procurement, the parties "intend to work towards a joint US-EU initiative incorporating sustainability considerations in public procurement," though these discussions currently are limited to "joint mapping of policies and a joint catalogue of best practices[.]" The parties have also begun "expert-level exchanges" on methodologies for measuring the carbon footprint of selected products. Secure Supply Chains The working group on secure supply chains has focused on identifying and addressing shared vulnerabilities in areas such as semiconductors, solar panels, rare earth magnets, and critical minerals. Key updates in these areas include the following: Semiconductors. US government agencies and the European Commission intend to participate in a two-month pilot to develop an "early warning system" for semiconductor supply chain disruptions. Additionally, the parties have articulated a "common goal" to limit semiconductor subsidies "to what is necessary, appropriate and proportionate to achieve public policy objectives," in order to avoid subsidy races. The parties are "determined to provide any support for this sector in line with WTO rules." Solar products. The parties "pledge to cooperate on respective project development and the design of financing tools" and on "bolstering solar manufacturing capacity that adheres to shared environmental, social, and quality standards[.]" They also will aim to "alleviate existing supply chain concentration, actively working together to address market access barriers and distortions to US-EU trade and investments[.]" Additionally, the parties will "work to minimise the impact of any protective measures on their respective industries[.]" Rare earth magnets. The parties plan on "redoubling and refocusing efforts" through the TTC and relevant multilateral initiatives "to continue address rare earth elements supply chain vulnerabilities and to promote undistorted trade throughout the rare earth supply chain." Such initiatives include the Conference on Critical Materials and Minerals between the European Union, the United States, Japan, Australia and Canada. The parties have expressed their resolve "to preserve the openness of the transatlantic supply chains" in this sector. ICTS Security and Competitiveness Among other initiatives, the parties have launched a dedicated task force on "joint US-EU public financing for secure and resilient connectivity and ICTS supply chains in third countries." This task force will promote the use of "trusted/non-high-risk suppliers" in third countries and share information on US and EU efforts to support "secure, resilient, and rights-respecting ICTS projects" in third countries. The task force's efforts will support US and EU "flagship infrastructure initiatives" by prioritizing "high-quality" ICTS infrastructure projects that promote principles of security, transparency, and competition. Export controls The export controls working group noted that the United States and EU have achieved an "unprecedented" level of cooperation in limiting exports of dual-use items and strategic technologies to Russia following its actions in Ukraine. Going forward, the parties "intend[] to continue to regularly exchange pertinent information [on export controls], with an initial focus on Russia and other potential sanctions evaders." They also will seek to work with third countries on export controls "in a joint and structured effort to uphold international peace and security" and counter circumvention. The parties also plan to exchange information and pursue coordination with respect to licensing practices, approaches to emerging technologies, and implementation of export controls. Investment Screening At this stage, the working group on investment screening is focused primarily on sharing information and best practices. Information exchanges thus far have focused on foreign direct investment trends, trends in investments from certain countries of origin, transaction structures of interest, and implementation of the parties' respective investment screening regimes. Moving forward, the working group intends to continue these information exchanges, and to develop a "holistic view" of security risks related to specific sensitive technologies and policy tools for addressing them. Outlook The TTC's work reflects important shifts in the format, substance, and ambition of transatlantic engagement on trade issues. Prior initiatives such as the proposed Transatlantic Trade and Investment Partnership focused on liberalizing trade in a comprehensive and legally binding manner. By contrast, the TTC reflects a strong focus on mitigating shared vulnerabilities and risks – including climate, geopolitical, national security, and supply chain risks – through mostly voluntary initiatives and policy coordination. The TTC has yielded aspirational commitments to avoid "unnecessary" escalation of transatlantic trade barriers, but has dedicated relatively little attention to expanding trade, compared to other priorities. Nevertheless, some TTC initiatives such as the proposed alignment of technology standards and conformity assessments have the potential to facilitate trade, and therefore are important priorities for the US business community. Additionally, there are indications that the TTC's work may feed into other important bilateral and plurilateral initiatives. For example, the TTC's efforts to align methodologies for calculating the carbon footprint of key products may inform the ongoing US-EU negotiation for a Global Arrangement on steel and aluminum trade, and subsequent policies developed pursuant to that arrangement. Moreover, Secretary Raimondo has announced that the US and EU intend to work toward a "concrete alignment" on export controls by the time of the next TTC ministerial at the end of this year, with a likely focus on semiconductors. She suggested that this arrangement could be broadened to include additional countries such as Japan in order to enhance its effectiveness. Commissioner Vestager has raised the possibility of other "TTC spinoffs," including a potential "framework" to spur investment in critical minerals in countries such as Canada and Australia. These initiatives could magnify the impact of the work done in the TTC.

“There were lofty expectations, especially among [American] Europhiles, that Europe would be more of a priority in overall Biden foreign policy,” remembered a foreign policy analyst at a Washington think tank. “There was this sense we would see a new day in the partnership.” But 2021 was also a year marred by friction: Afghanistan, the AUKUS defense pact, the challenges posed by Russia and China, as well as political developments in the U.S. have all “fed a conclusion in Europe that the relationship with the U.S. will never go back to 2016,” said a former U.S. ambassador to NATO — whether former President Donald Trump returns or not. And now the challenge facing the Biden administration is to prove such concerns wrong. “You have to know that you have no other friends than Europe,” warned a Polish foreign policy expert. “If you screw up talking with us, that undermines the U.S. system of alliances and that is not useful for the U.S.” And when it comes to the looming confrontation with Russia over Ukraine, Europeans worry the U.S. has not yet learned this lesson, and there is fear, especially among Poles, that a deal affecting their futures will be made over their heads. Moreover, as observed by a former U.S. ambassador to the EU, AUKUS openly said to Europeans that “the China folks in the White House are driving the bus. And they don’t have an appreciation of the EU as a useful partner on things that matter to the U.S.” As a result, quipped a Berlin-based analyst: “Anxiety, skepticism and bad juju around the pivot to Asia is prevalent everywhere in Europe. The fear is that it will lead to transatlantic decoupling.” And as Washington’s attention progressively shifts to Asia, more incidents sparking Europeans’ sense of abandonment or betrayal may be inevitable. The first test of this could be Taiwan, which has opened a representative office in the Lithuanian capital Vilnius. Beijing has imposed economic sanctions on the Baltic nation and threatened to deny multinational firms exporting from Lithuania access to China’s market in retaliation. If Washington stands idly by while Beijing coerces individual EU member countries and corporations in this manner, much-vaunted transatlantic cooperation on China could prove to be a paper tiger.

But whenever a crisis breaks out, both sides realise very quickly that together they are much more efficient in defending their interests. The US needs support and legitimacy when it wants to act, and Europeans need the US to take a lead and to build a coalition. Together they are unmatched in military and diplomatic power and in economic weight. And on most issues they easily find agreement, because they have a decades-long history of working together and because they share the values of liberal democracy. In the more than two decades since the end of the Cold War, both sides of the Atlantic have remained the best of partners, despite some disagreements. They have dealt with crises on the Balkans together; they have gone to war together in Afghanistan and elsewhere; they worked in tandem in dealing with global challenges at the level of the G8 (now G7), the G20 and the UN and in other global fora. They remain each other’s most important markets. Furthermore, Russian attempts during the 2000s to split key European countries—Germany and France—away from the US and to form some kind of Eurasian geopolitical alliance excluding the US, weren’t successful, despite the deep rift over the Iraq war. Today the Russian assault on the European peace order has brought the two sides together again in formulating a joint, closely coordinated response. Apparently, Europe and the US and Canada still form the core of what has come to be known as the West—an alliance of like-minded, closely connected liberal democracies and market economies. Together they have, despite all disagreements, built and enlarged a zone of stability, liberty and prosperity that stretches across all continents and serves as the backbone of globalisation.

The European Union’s Juncker 26 Commission (2014-2019) actively avoided regulating AI, causing the European Parliament to increase their efforts as a proactive voice in favor of stronger AI regulation. However, since the beginning of Ursula von der Leyen’s tenure, the Commission has initiated efforts to adopt stronger regulation for AI applications (i.e., differentiating regulation of AI based on defined “high-risk” and “low-risk” sectors”) and associated data spaces.27,28 These legislative proposals and their associated discussions are planned to be completed by the end of 2020. During the strategic planning and budgeting process of its R&D programs, the EU committed to providing at least EUR10.7 billion29 for AI-related research conducted between 2021 and 2027.30 Despite these financial and political efforts, the EU still remains technologically dependent on the US and China and suffers from a lack of capital and private funding, decentralized and uncoordinated AI expertise, severe brain drain (including to the US), and slow adoption of AI programming in its education and public sectors.

The EU and US are in close contact over artificial intelligence (AI) risks and mitigation, including a possible partnership for a framework on generative AI, according to an unreleased draft statement, seen by Euractiv, for a joint meeting to be held on 4-5 April.

While the EU passed comprehensive AI regulation earlier in March, the US has issued an executive order on the technology on the federal level, focused around guidelines as opposed to the EU’s binding measures. Several US states have enacted their own laws on the technology.