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“The EU Is Not Big Enough to Shift the World”


What will the future hold for the EU, now that the United Kingdom is leaving and the United States is behaving in a hostile way? The economist MARTIN WOLF thinks it has no chance of gaining real strategic autonomy, its economic might notwithstanding. 

© REUTERS/Jonathan Ernst

We are conducting this interview on a sad day, January the 31st. The United Kingdom is departing the European Union tonight. With the EU’s second largest economy gone, where does this leave the EU? The immediate reaction of the EU has been to circle the wagons and to maintain and re-emphasize unity—in the face of the first such event, the first time a country has left the EU, and obviously concerned about potentially hostile relations in a hostile world. So, in the first place the EU has strengthened its unity. The second point is, that Britain’s departure hasn’t made any of the obvious problems within the EU any easier, except that it’s removed one moderately problematic member—but until the Brexit vote happened, not an enormously problematic member, because in some of the most difficult issues the EU faced, Britain wasn’t involved: the eurocrisis, where the UK was neither helpful nor a hindrance. It’s obviously not really involved, or hasn’t been at least since the early 2000s, in relations between the old members and the new members of Central and Eastern Europe or in the relations with Russia. It doesn’t actually even have very much to do with relations with America. But that might change.

So, I don’t think Britain’s departure solves any problems for the EU. Third, there’s a diminution in the perceived international weight of the EU. Because of its history and location, Britain has exceptionally close—exceptional by the standards of other members—relationships with countries around the world. You know, people know Britain pretty well, in Asia, the Americas. There are other member countries with important relations like Spain with Latin America, but I think Britain was exceptional. So, people feel this is an EU they know less well. Germany is less well-known, for example. And they also feel that, I think, if Britain is leaving, something is wrong with the EU. There is a sort of weakening of credibility, which will have to be re-established, and the sense, well, maybe there will be more break-ups.

And finally, I think that Britain’s departure will probably mean a sort of change in the policy culture of the EU itself. I would expect it to become more southern—it must do so—less economically liberal, more continental. And I would expect therefore cumulatively over time the orientation of the EU and the policy choices of the EU will be somewhat different than they would have been if Britain had remained a member. Remember that the single market, as we know it, wouldn’t have happened. It would have been quite different, it’s quite a big deal. I expect the EU to be somewhat more inward-looking, somewhat more defensive, somewhat more regulation-minded.

The ambitions of the European Commission led by Ursula von der Leyen, of course, go a completely different way. Absolutely. And we will have to see if she succeeds.

Von der Leyen promised a “geopolitical commission,” most likely using geo-economic tools. If you look into the EU’s toolbox, is there much to look at? I think the problem the EU has is that it has lost its big alliances, particularly with the United States. The EU is not and—whatever they pretend—will not in the near future be a security player of big weight. That would require a policy revolution, above all in Germany. And we’re not seeing much sign of that at the moment. So, it’s geo-economics. There are two big areas where in theory the EU could play big role. The first is trade. Globalization is a big interest of the EU. It is a very open economy. Actually, it is the most open of the large economies. If you regard the EU as a whole, it’s substantially more open than China or let alone the US. And the other one is climate.

The problem in both cases is that though the EU is big, it’s not big enough on its own to shift the world. And it’s not clear who its allies are going to be. The United States obviously has become highly unilateralist and protectionist. So, that makes a globalization program very difficult. Indeed, the effort is going to be devoted clearly just to managing the bilateral relations with the US. And vis-à-vis China, it is very difficult to know how to make progress with China. It’s a very complicated story. The EU has a lot of interests in common with the US, but the US is not coordinating with it or not very much. Creating a critical mass of willing countries that will make a really big difference to the progress on the trade front will not be impossible, but it will be very, very difficult.

And on climate it’s basically the same story. You’ve got the US out of the picture, which is a big loss, and again China is in a very different place in terms of its development, its ambitions. It may be possible to construct some sort of climate alliance with China, but it’s going to be a tremendously big problem. The EU is in a very different stage of development with very different priorities from China, which is still a very fast-growing, emerging economy. So I think in those big areas, the EU can do interesting things and important things. I don’t underestimate them, but shifting the global dial is going to be very, very difficult.

Do you think the rapid worsening of transatlantic relations can be reversed after President Donald Trump? It obviously will depend, first, on what happens in the presidential elections and the congressional elections later this year. Speaking now, it looks rather likely to me that Mr. Trump will be re-elected. But I think, there’s a second question, which is how much difference it would make if a Democrat won. It would depend rather on who the Democrat was, but I think, the general balance of opinion in the US has shifted in a more inward-looking direction, a more protectionist direction, a more anti-Chinese direction. I think a Democrat will be much friendlier to the Europeans; it would make it much easier to have good international relations, but I think, it will be very difficult to get a Democratic administration to focus on any huge, ambitious global endeavor. I mean, the world in which the Europeans and the Clinton administration completed the Uruguay Round for example, 26 years ago, seems unimaginably distant.

Donald Trump is on tape saying the EU was constructed to “screw up” the United States… And he’s not entirely wrong. This was very clearly not the German view in the 1950s and 1960s, but it was a French view. One of the raisons d’être of the EU and more recently the euro was to challenge American power. The French have a pretty consistent view going back to Charles de Gaulle. They got out of NATO; later they wanted to upgrade the euro as a rival currency. So, the Americans aren’t completely wrong. Nonetheless, the dominant view of the US until the end of the Cold War was that the Europeans were very important allies. There were on the forefront in the global war with Communism. And the stronger Europe was economically and politically, the better. They didn’t take the French threat too seriously for perfectly good reasons.

The end of the Cold War changed everything. The first period, the 1990s , were “the holiday from history.” Everything was fine, the world was perfect. Then you got into the post-9/11 period and you got into a really big split between America and Europe over the Iraq war, and it’s an important split. The Europeans were right, but that doesn’t make the Americans like them better, and there was a split within Europe, because the British went their own way, which was itself, I think, a revealing fact.

But at that point, Europe began to just look less important. It’s no longer the front, because there is no front there anymore. Russia has gone away, that’s what we felt, and we are now interested in the Middle East and the pivot to Asia, which came later. What’s Europe got to do with that? Nothing. It’s a nuisance in the Middle East and as far as Asia is concerned, it’s irrelevant. So, the Americans increasingly became a mixture of hostile and indifferent, more indifferent than hostile, but there was some real hostility.

Then in the post-financial crisis period, there’s been the long period of economic crisis in Europe, at least it was seen as a crisis. I talked to a lot of American policy makers: Was Europe a help? No, it was a nuisance. There was a tremendous worry that Europe would create the next stage of the financial crisis and then, finally, we get to the Trump era. Now, Putin is a bit more of a threat, but he’s not seen as a threat like the Soviet Union by most Americans. Trump likes him, whereas Europe is not seen as central to America’s concerns and is seen—on the right—as moralistic and unhelpful.

There are still some Americans in the center-left who admire Europe, admire Europe’s civic culture, they admire the social democratic systems and values. Probably, if you talked to Elizabeth Warren, she would say actually Europe is the way we should do things. I don’t underestimate that, but I think basically Europe simply doesn’t play the same role in America’s interests. And then you get this very Trumpian, protectionist view: Europe is running a big trade surplus with us, so it’s hostile. Europe depends on our defense umbrella and it’s not paying enough for it, so we’re providing them with a valuable thing for free, so they’re freeloaders and then they moralize at us all the time and tell us how bad we are.

So I think for Trump, given his protectionist views on climate change, his very transactional view of international relations, Europe is really, really irritating. And then it’s stuffed full of liberal democracies and he doesn’t much like liberal democracies. So, for him to be lectured by the German chancellor about how to behave as a decent democrat is, I think, pretty well unbearable. And the fact that I agree with Angela Merkel doesn’t make it any better.

Is there any chance of the EU achieving the French aim of strategic autonomy? Well, it would be possible for Europe to achieve a fair degree of strategic autonomy. It is very big, 450 million people. It is still the second largest economy after the US, depending on how you measure it. It has clear economic weaknesses, it is slow-growing, very slow-growing, it is aging, it is not doing as well in the frontier technologies with America and China, but still it is a big power.

But the real question is whether it can develop a collective will and purpose to achieve that. Does it really want strategic autonomy? Does it want to exert power in the world with its economic wealth and weight? There two pretty big obstacles to doing this. One is Germany. What is it that Germany wants? My strong impression is that Germany remains emotionally very committed to not being a great power, which is the post-war situation. Second, Europe remains a mosaic of very different countries and cultures with very different attitudes. Can you create a genuine, coherent whole out of it? Otherwise, if you cannot do it, you need much more political integration. Much more!

So, I do not think it is likely to be. The French ambition, which is basically the French idea, when they say, “Europe must have strategic autonomy,” they mean, “You must do exactly what France wants and put everything behind France.” Well, that is not how it is going to work. I have to say, in these matters France is actually closer to Britain than it is to Germany and Germany is a very different, for very obvious reasons.

Would a US-China confrontation reverse the trend of deteriorating transatlantic relations? This is a really important question. Trump is very peculiar in that he is so unilateralist and so indifferent to a lot of alliances. Another president may also be concerned with balancing China while having very substantial interests and views in common with Europe. I have talked to German businesses in China: they have very similar concerns to those of the Americans.

So in economics it is perfectly possible to imagine an alliance of Europe and America, and Japan as well, confronting China. But of course in a geopolitical and geostrategic confrontation with China, Europe is not going to be relevant. It does not have relevant forces outside economics, to bring to bear in this. Europe is no longer a strategic front, which is a very good thing. Who wants to be the strategic front? It was not much fun when the Soviet army were here [in Berlin].

By the way, there is another possibility, which is relevant to this: Europe has the potential to extend its economic influence by forging very close relationships with what used to be the Trans-Pacific Partnership (TPP) and is now minus America. At some point I think the US will go back in. So, an alliance of liberal-market democracies on the economic side is conceivable and China could break that. That could yet be an important strategic opportunity.

So, if the Americans are moderately intelligent, you could imagine a world, five to ten years from now, in which you have China and probably Russia on the one side and a Western-led alliance of liberal democracies on the other. And Europe would be an important part of that. That would involve a pretty big shift in American thinking at the moment, but I could imagine that happening.

The interview was conducted by Henning Hoff. Assistance: John-William Boer and David Schmitt. Martin Wolf was speaking at the “After Populism” conference organized by the German Council on Foreign Relations (DGAP).