Every month, TEPSA Secretary-General Jim Cloos writes a newsletter editorial on the news of the day, the future of Europe, and the work of the TEPSA network. To receive every upcoming editorial direct to your inbox, SUBSCRIBE to the TEPSA Newsletter here.
2024 will be a momentous year for the EU and the US. The EU will enter a new institutional cycle with a new European Parliament, a new Commission, and a new President of the European Council. The US Presidential election in November will be a stark choice between an internationalist and Europe-friendly President and a more isolationist one; this is true even if Trump is prevented from running because of his judiciary affairs. Its outcome will shape global and European policies for the next years. The effects of a Trump or Trump-style President on support to Ukraine in its struggle for freedom and independence could be devastating.
The US role in European politics is the elephant in the room, always present, rarely mentioned in the public discourse. In the debate on strategic autonomy, the talk is primarily about Europe lowering its dependence on Russian energy and Chinese manufacturing. Both are admittedly major issues, but they cannot be viewed in isolation from the relationship with the US.
In geopolitical terms, Russia’s war against Ukraine has brought Washington and Brussels much closer together and has rebooted the NATO alliance. This is a positive development, but one which raises two very different types of issues. The first is linked to relations with China. For the US, this is the number one challenge. While the Europeans worry about a level playing field in economic relations with the Asian giant, the American concern is primarily geostrategic and about maintaining American dominance globally*. Washington expects Europe to align its Chinese policy with that of the US, in the framework of a systemic rivalry between China and Russia on the one hand and the Western democracies on the other. The Biden administration is not as heavy-handed as its predecessor, but the pressure on EU Member States to stop relying on HUAWEI for 5G is unmistakable. The second worry relates to a possible Republican victory in the November election. What will Europe do if the new administration decides that the war must end regardless of whether Ukraine has reconquered its territories or a big part of them?
In economic and financial terms, Europe holds its own in many respects. The post-war history here is one of success. Successive American administrations encouraged European integration and the setting up of a powerful Single Market. Naturally, as the EU gathered steam and became an economic and even more so a trade power**, competition between the two sides of the Atlantic became fiercer, as illustrated by the frictions around Boeing and Airbus, GMOs, agricultural exports, and regulatory issues. The Trump Presidency was a wake-up call because its actions (sanctions against European steel for instance), and especially its aggressive rhetoric, threatened to transform normal trade disputes into a more systemic opposition. With the return of a more Europe-friendly administration under Biden, things settled down. But the recent Inflation Reduction Act (IRA) program and the activist repatriation of industries to America can be seen as a potential threat to European industries. America first was a Trump slogan, but it is also a Biden policy.
There are several structural imbalances that limit European autonomy, regardless of who sits in the White House. The first is linked to the predominance of the dollar, which not only gives the US a heightened margin of maneuver in running its own policy, but also allows it to ‘punish’ reluctant partners who do not tow the US line. A good example of this were the secondary sanctions imposed by the Trump administration on European companies after the US had walked out on the nuclear deal with Iran. The euro has been a big success, but it has not threatened the preeminence of the dollar, because the EU has not been willing or able to create the conditions for the euro to be an alternative to the dollar. It could have provided an alternative for other parts of the world to diminish their dependence on the dollar, but this only happened in a limited way. Countries like China and Russia are now actively seeking other ways of diversifying their financial assets, via crypto-currencies or purchases of gold. The external use of the euro remains a big challenge over the coming years; this should be part of the new Strategic Agenda to be adopted by the European Council in June 2024.
A second structural imbalance lies in the total dominance of US IT Tech Giants. The only competition here comes from China, not from the EU. Europe has excellent universities and research institutes, but it has failed to capitalise on the advances of technological innovation. The financial power of the US companies is such that they can buy promising European start-ups and thus further maximise their dominance. That is why the EU should pursue novel ways, like promoting open-source AI instruments, to lower dependence on the big US companies. Regulatory advances by and in Europe are good and necessary, and many Americans in fact look to Europe to help frame the evolution of the new technologies. But in the end, there is a limit to what you can do in terms of regulation if you are not part of the innovation and the economic power it provides. Europe needs a radical new mindset encouraging risk-taking and public and private investment and strong action at the EU and national levels. European police forces wanting to track crypto-currency transactions presently rely on the services offered by two private US companies, Chain Analysis and TRM Lab. These services are very expensive, while also raising important sovereignty issues. Digital sovereignty, together with the Green Revolution, will be one of the most important challenges for the new European team taking over in 2024.
The third area to mention is defence. For historic reasons, the EU is not a defence power; it has relied for the last decades on the American security guarantees and NATO. The lack of autonomy in this area is obvious and will not go away in the foreseeable future, as the war in Ukraine illustrates. But that should not prevent Europeans from looking at the issue from a longer-term perspective. The first imperative, which by now is well recognised, is to increase the European contribution to the joint security policy by revving up defence expenditure and strengthening the EU pillar within NATO. That must go together with a determined effort to create a strong European defence industry and capabilities. If the increase in expenditure will primarily go to the purchase of more US equipment, Europe will have missed a unique chance to become more autonomous and to reap the benefits for the overall economy from research and investment in the defence area. The role of US military investments in fuelling the US economy cannot be overestimated; most major advances in IT over the past decades have originated within the defence sector. Apart from these economic considerations, a stronger European defence base will both be a bonus for the transatlantic defence effort and … a re-assurance policy in case Europe and the US drift apart one day.
The era of American and Western dominance that opened after 1991 is coming to an end. The disastrous interventions in Iraq and Libya and the bungled exit from Afghanistan have damaged the standing of the West across the world. It is true that the Russian aggression against Ukraine has given new life to NATO and raised hopes of a reassertion of a united West. But the reaction across the globe to this war has had a sobering effect: China has moved closer to Russia, and countries like India, South Africa, Brazil, and many others refuse to choose between Russia and the West and even more to follow the Western lead. Containing China, the way the USSR was contained, will not work; the world will be multi-polar. This poses a serious challenge to the EU if the US pursues an ever tougher line against China. EU imports from China increased by 32% between January 2021 and December 2022, and China is now the EU’s biggest trading partner. One may argue that the Europeans should be wary of further increasing their dependence on China in this way. In any event, China will remain an important and probably indispensable partner of the EU in the economic field. The uncertainties surrounding the US election in November and the growing polarisation of US society compound the problem.
The EU will have to learn to ask ’as if’ questions also in relation to the US, and better anticipate matters. In the event of a Republican victory in November, the EU will have little time to adjust to possible major policy changes in Washington. In the event of a Biden victory, it will have more time, but the long term questions remain. The Republican party is on a problematic course, with or without Trump, and there is currently no credible successor to Biden among the Democrats. The Europeans simply do not have the luxury to ignore Europe’s structural weaknesses. The imbalances in the relationship between Europe and the US and the uncertainty about future US policies taken together could lead to the US and Europe drifting apart.
The EU cannot afford to dream about settling back into the comfort of the post-war paradigm. And the US must drop the silent assumption, so prevalent among its elites, that it is natural for it to lead on all major issues and for the Europeans to follow. A strong partner can and will at times have different views and even different interests, and should be allowed to defend them without being accused of jeopardising the relationship. It is up to Europe to decide whether it wants to accept inferiority or whether it is determined to work towards being that strong partner the US and the world need***.
Jim Cloos, TEPSA Secretary-General
* See in this respect the latest TEPSA European Council Experts’ Debrief on relations between the EU and China.
** The EU is the second largest exporter in the world, ahead of the US and behind China.
*** TEPSA will be gathering analysis on this topic from across its pan-European network to reflect on the issue of EU-US relations and the future of Europe. This analysis, and the policy recommendations borne from it, will be compiled in an upcoming edition in the “Future of Europe: Views from the Capitals” series, edited by Michael Kading, Johannes Pollak, and Paul Schmidt.