More politics in the EU-US trade partnership

Globalisation seems to have been counted out. Global supply chains are suffering from Russia's attack on Ukraine, the systemic conflict between China and the USA and the aftermath of the coronavirus pandemic. As a result, the politics of international trade are once again taking centre stage. In Germany, the dispute over the Chinese shipping company Cosco's involvement in a terminal in the port of Hamburg in recent weeks was certainly the most prominent example of the question of how much politics should interfere in the economy. After all, the problems surrounding Russian gas supplies have ruthlessly exposed what the discussions about the 5G network and Huawei have already revealed: the country's vulnerability to economic dependency on authoritarian states.

A new look at economic policy on both sides of the Atlantic

However, Germany is not alone in facing this problem. Other EU countries are feeling the current effects of economic dependency just as much as the USA. In particular, dependencies on China are alarming for many countries: how vulnerable are their own economies due to close economic ties with a China that does not shy away from human rights violations, openly sabre-rattles against Taiwan and uses its economic power for political interests without a second thought?

Germany should not tackle these problems alone. In international trade policy, the EU's most communitised area, common trade policy goals need to be defined at European level. Moreover, reciprocal trade has always been a cornerstone of the transatlantic partnership. However, amidst the multitude of global crises, previously valid assumptions about the relationship between business and the state are being questioned on both sides of the Atlantic and a stronger role for the state is being called for. At the Asia-Pacific Conference in Singapore last weekend (12 November 2022), Germany's Economics Minister Robert Habeck emphasised that the days of apolitical trade are over.

Between decoupling and diversification

Despite the realisation shared by all sides that more politics is needed in the economy in view of the current crises, the debates in the US and the EU differ, especially with regard to China. While the systemic conflict is the top priority for the US and terms such as "decoupling" and "friendshoring" (trade only with countries that share similar values) have long been on everyone's lips, German politicians never tire of emphasising the importance of good economic relations with China. The German business delegation that accompanied Chancellor Olaf Scholz on his controversial visit to China in early November 2022 should also be assessed from this perspective. Instead of decoupling from China, Germany must strive for greater diversification, Robert Habeck explained accordingly.

Diversification should help to spread potential risks more widely and, above all, intensify trade with friendly countries.

Common challenges need common answers

In view of the current crises, the question is not so much how much politics the economy can actually tolerate, but rather how much politics a forward-looking economy needs in order to realise a socio-economic transformation of the global economic system. Four key issues are of particular importance in this regard.

Firstly, the USA and the EU should work together to protect their global supply chains against the current geo-economic competition. The transatlantic and Chinese economies are closely intertwined, while at the same time increasing rivalry is determining political behaviour. Resilient supply chains and the protection of new technologies from misuse by authoritarian governments are central to future economic activity. The EU and the US should work to build resilient transatlantic trade relations to enable prosperity and technological progress within a values- and rules-based economic system.

Second, the goal of the transatlantic trade partnership must be to reconcile current energy security with long-term sustainability. Far-reaching measures in global trade are required to achieve the desired results in climate protection: together with China, the USA and the EU are responsible for around half of global trade and CO2 emissions. The transatlantic partners must ensure that both their trade and energy policy instruments can complement international climate protection efforts and thus have a global impact.

Thirdly, transatlantic trade policy must address the social inequalities created by globalisation in both the Global North and the Global South. Social inequality and its economic and political consequences have become a major global social challenge that marginalises people who are already discriminated against, polarises societies and undermines democratic institutions. Any economic integration must therefore also be a socio-economic integration.

Fourthly, the current governments on both sides of the Atlantic must ensure that globally recognised fundamental rights continue to form the foundation of the transatlantic security and trade partnership in the future. About a year ago, the SPD, FDP and Greens agreed in the coalition agreement to make human rights their compass in "systemic competition" with autocracies. In view of global networking through supply chains, the protection of human rights must not end at transatlantic borders, especially in trade policy. The transatlantic partners must use their political and economic power to stand up for human rights along their global production lines.

Transatlantic trade policy at your fingertips: FOTAR 2022 in Hamburg

The ambitions for a transatlantic trade policy outlined here need to be put into practice: For the third time, the Federal Chancellor Helmut Schmidt Foundation (BKHS) and the Europa-Kolleg Hamburg are hosting their joint conference format "FOTAR - The Future of Transatlantic Relations" on 8 December.

The motto of FOTAR 2022 is "The Politics of Transatlantic Trade Relations". In a joint dialogue, we want to work out how the transatlantic trade partnership can contribute to the socio-economic transformation of the global economic system. To this end, we will bring together politicians and practitioners from the USA and the EU at our international symposium. We will also give the next generation of transatlanticists a chance to have their say as part of a FOTAR scholarship programme for young academics.

We cordially invite you to join us and our experts at FOTAR 2022.

The conference programme with a short introduction of all experts and FOTAR Scholars as well as the possibility to register can be found here.