Europeans must keep their eyes on the long-term challenges
By: Bled Strategic Forum
Tags: Trade, Globalization, Bled Strategic Forum, Resource Management, Bsf2019

Broadening the beneficiaries of globalization, decoupling future economic growth from resources use and avoiding escalation of geopolitical competition are key challenges that Europe must tackle.

/ By Dr. Robin Niblett, Director, Chatham House

Amid Brexit, America First and a Chinese-US trade war, it is not an easy time for multilateralist Eu­ropeans. However, there is risk that their policymakers are drawn into responding to the daily vicissitudes of short-term shocks and tempestuous tweets. Instead, Europeans should stay focused on the most import­ant long-term challenges. Three stand out.

The first is to rebalance global­ization so that it works for all. Economic globalization has brought more prosperity to most people across the world, but it has had uneven and unequal effects. Too often, in focusing on its opportunities or simply in viewing globalisation as inevitable, in­significant attention has been given to the disaggregated economic and social effects of globalisation, which have hit specific sectors, localities and communities hard, churning up the more emotional and identity-based politics spreading across Europe, the Amer­icas and Asia.

The task of broadening the beneficiaries of globalization will not be easy. Much of the world will struggle to escape this period of sluggish growth. Aging societies in devel­oped economies need to confront unsustain­able worker-dependency ratios. Emerging economies have yet to overcome the middle income trap. And the just-in time global economy is highly vulnerable to any disrup­tions to the flow of goods, services, people and data, be that from cyber-attacks, trade disputes or the geopolitical constriction of maritime choke points.

The second, related challenge is to decouple future economic growth from resource use. As the IPCC has made clear, there is little more than a de­cade in which to try to ensure that global temperature change is limited to a 1.5 degree increase. Limiting human-driven carbon emissions will be only one — though crucial — component of rebalancing global growth and consump­tion. Managing freshwater water sup­plies and land use will pose equally complex trade-offs.

Europeans are instinctively supportive of the multilateral system, not only because it suits their interests, but also because they are not well equipped to protect those inter­ests in a more combative and transactional world.

The third challenge is to avoid an escalation in the current bilateral geopolitical competition be­tween the US and China into a more danger­ous, global stand-off. Many Europeans share US concerns about Chinese trade practices, intellectual property theft, domestic political repression and aggressive territorial claims in the South China Sea. But most fear that the Trump ad­ministration’s unilat­erally confrontational approach will lead to a wider deterioration in the multilateral rules-based system, which has served Eu­rope and America so well on balance these past 70 years.

Europeans are instinctively supportive of the multilateral system, not only because it suits their interests, but also because they are not well equipped to protect those inter­ests in a more combative and transactional world. This is especially the case when Eu­rope’s main transatlantic partner — the Unit­ed States — is actively fostering the return to great power competition. Despite their long roster of domestic challenges — from protect­ing the rule of law within the EU to reforming the Eurozone — Europeans need to put equal effort today into managing this challenging international context. They should be will­ing to invest in and defend the international system where it under strain — from freedom of navigation to a functioning WTO dispute settlement mechanism — and be a source of ideas, energy and political will to reform and adapt where it needs updating, for example in the regulation of emerging technology. Overall, there should be four strands to this strategy.

First, the EU should use its collective market strength to maximum effect so as to usher in a more equitable period of econom­ic globalisation. The EU needs to expand further its web of successful recent trade negotiations, so as to embed a growing net­work of mid-sized countries in a rules-based approach to free trade. Especially on the reg­ulatory side, the EU can extend shared ap­proaches to competition policy, data protec­tion, tax avoidance and supply chain ethics and transparency. Tackling these issues in­ternationally does not require prior consen­sus in multilateral institutions; it could also be instigated through the EU’s own market and regulatory power and bilateral agree­ments.

The EU should use its collective market strength to maximum effect so as to usher in a more equitable period of economic globalisation.

Second, the EU could use its regulatory power and economic weight to accelerate Europe’s contribution to responding to cli­mate change. European citizens are increas­ingly aware of the effects of their own choices on the natural environment, as the shift in attitudes to plastic usage demonstrates. But there is a long way to go. European govern­ments must work in tandem with multina­tional companies and non-profit organisa­tions, and alongside their own consumers to set the example for an accelerated transi­tion towards a low carbon and more circular economy. National budgets should be com­bined with collective Europe-led vehicles such as the EIB and EBRD, so as to focus on transformational long term investments in clean energy infrastructure, transport and building sustainability. Europe­an development policy should be linked to ensuring countries escape the fossil fuel trap, deliv­ering more flexible and energy efficient growth.

Third, Europeans should try to reduce the chance of escalation in geopolitical competition. Eu­rope needs to take an approach towards China that incentivis­es a deepening of China’s engagement in multilateral responses toward shared global challenges such as climate change and en­vironmental management. Unlike the US, Europeans have a self-interest in trying to steer China’s Belt and Road initiative along a more environmentally sustainable and fi­nancially transparent direction. On the oth­er hand, it should join the US in screening Chinese inward investment more carefully, in holding Chinese state subsidies to account in the WTO, and in challenging the spread of surveillance technologies that undermine human rights beyond China’s borders. This will require European leaders to commit to making China policy a central area for coor­dination rather than giving China the oppor­tunity to divide its positions.

Finally, the UK and its EU partners must be aware that these initiatives will be less ef­fective if the process of negotiating Britain’s withdrawal from the EU weakens any fur­ther Europe’s collective voice on the world stage. For Britain, its geography means that the EU will remain the first circle of its secu­rity and economic interests. For the EU, Brit­ain’s economic, diplomatic and military heft will be essential if Europe is to be a capable collective international actor. This is a time for Europeans to hang together, or they risk hanging separately.