Joe Biden begins his first full day as the 46th president of the United States today with as daunting a list of foreign-policy challenges as almost any of his predecessors. After four years of Donald Trump, the new administration must overcome skepticism about America’s ability to deal with the great tests facing the world, including the rise of China as a 21st-century superpower, the spread of nuclear weapons, and the onslaught of man-made climate change. To this list can be added a new issue: patching up the transatlantic alliance.
Last month, with Biden’s inauguration just weeks away, the European Union and China pushed a new economic agreement over the line. The actual terms of the China Investment Agreement remain unclear—the text is still to be finalized—but the broad outline is simple enough: a deeper trading relationship based on common and apparently enforceable standards. According to the EU, the deal ties Beijing to a new “values-based investment relationship” that will protect labor and environmental standards, and help root China in the rules-based global order. This is Europe fulfilling the global role it has cast for itself as a “regulatory superpower,” exporting and defending its values through its economic size.
Yet this is not how the agreement is seen in Washington. Brussels went forward with the deal despite a very public plea from the incoming administration to hold fire. Four years of Europe-bashing by Donald Trump, it seems, had hardened European hearts in favor of a pointed display of “strategic autonomy.” Autonomy from whom, you might ask? The United States is the only answer.
Europe’s refusal to wait until yesterday’s transfer of power in Washington is an indication of the extent to which the world has changed since Biden was last in government. Today’s Europe is not prepared to “consult” the U.S. before signing an agreement of such importance, as Biden’s national security adviser, Jake Sullivan, requested—and it rejects the very notion that it should have to. Just because the U.S. defends Europe does not mean a kind of Brezhnev doctrine of obedience is in place, the EU argues.
In one sense, then, Biden’s Europe problem is obvious: The continent that the U.S. fought two wars to free, paid to rebuild, and has spent 75 years protecting at great, uneven, and continuing cost is now striking deals behind its back with its main strategic rival. Some ally. In this telling, Trump’s shortsighted and unpredictable malevolence has created the world that he claimed already existed but that, in fact, did not: one in which the U.S. is being taken for a ride by allies that are no such thing.
This deal with China, however, masks an altogether more profound problem for Biden: not European strength, but weakness. For much of the past few years—and particularly the past few weeks—the specter that has haunted the West is one of American decline. In contrast, Europe, embodied by that most unlikely of liberal heroes, Germany’s chancellor, Angela Merkel, had come of age and was the real leader of the free world. Europe had its problems, the argument went, but was showing none of the morbid symptoms on display at the Capitol this month.
While the U.S. clearly does have significant problems to overcome, though, these should not overshadow some of the systemic challenges facing Europe, which may prove in time to be far more serious than those in America.
In 2007, following years of solid growth, the EU’s economy was slightly larger than that of the U.S., according to the World Bank, and both were drastically larger than China’s. By 2019, the American economy had grown by around 50 percent, whereas the EU’s had essentially flatlined. China, meanwhile, had all but caught up with the EU. George Magnus, an economist at Oxford University’s China Centre, told me that the trend over the past decade was clear: American resurgence and European stagnation. Since 2010, the U.S. share of the global economy has not only held, but increased, from 23 percent to 25 percent, according to International Monetary Fund data used by Magnus. Europe’s has shrunk from 21.5 percent to 17.5 percent, even including Britain in the total.
If you take Europe’s perspective that economic heft is its own form of might, then it is Europe that is in relative decline, not America.
One notable aspect of the past few weeks is the steady discrediting of Trumpism as a political ideology, but without the cost of an economic revolution that might erode America’s extraordinary strength, at least so far. Europe, meanwhile, even as its second-biggest economy, Britain, opted to leave, has yet to face a moment of crisis, because its decline is not so obvious—a steady, creeping crisis rather than a bombastic one as seen across the Atlantic.
European diplomats are concerned, for example, that the continent—including Britain—simply does not have the industrial or technological base to compete with the U.S. or China. Of the top 50 companies in the world by market capitalization, only three are headquartered in the EU, and only one of those is involved in technology. The U.S., by contrast, has 34, 10 of which are tech-focused. With Britain’s departure, the EU also has only one university in the top 50 in the world, and has lost the continent’s global financial hub, London. Even the region’s economic engine, Germany, has question marks hanging over it: Tesla, for example, is worth more than all of Germany’s main car manufacturers combined.
On top of this, although the EU has shown admirable political unity over Brexit, it remains a politically weak confederation of states that have hugely different economies and interests, featuring higher levels of economic inequality than even the U.S., with poorer southern Europe lagging far behind wealthy northern countries. It must also now deal with a pesky regional competitor in Britain, whose future remains unclear.
Henry Kissinger once described the newly unified Germany as “too big for Europe, but too small for the world.” In some senses, the same might now be true of the EU: It is strong and united enough to be a pain for its erstwhile imperial overlord, but not yet strong enough to strike out completely on its own.
There are two strategic calculations for Biden to consider, and both are problematic. The first is that the driving force behind this deal was Merkel. Fundamentally, the German chancellor—and Germany generally—does not want to have to pick sides in a conflict between the U.S. and China, according to analysts I spoke with in Berlin and Washington. The country rejects the very idea of a grouping of democracies to contain China’s rise. It does not want a transatlantic alliance on this issue. By reaching an agreement with Beijing, Merkel hopes to avoid this trap. (Nor will her retirement this year necessarily change much. Her replacement as leader of the center-right Christian Democrats, Armin Laschet, is a moderate Merkelite with a history of soft-pedaling criticism of Russia and China.)
The second challenge for Biden is that the EU’s deal with China reveals Germany’s absorption of the French obsession with strategic autonomy from the United States. The inherent danger in this is that it will become self-fulfilling, and Europe could try to achieve economic independence to deal with China while aligning with the U.S. to address the strategic challenge of China’s economic rise. Perhaps Washington will conclude that it’s not particularly happy with this bargain, and seek new international formats to contain China, loosening its commitment to the heavy expense of Europe’s military defense umbrella.
Europe sees itself as one of the three great economic powers on Earth, but is it overplaying its hand? Notably, it persists in promoting engagement with Beijing even when some former proponents of America’s engagement policy with China now argue that it was a mistake, an effort exploited by Beijing to build its own power that did little to westernize or democratize its behavior.
What is remarkable about the EU-China deal, which is supposed to show European strategic autonomy, is how unstrategic it appears to be. At first glance, it seems little more than a tactical opening for certain sectors in Europe. The agreement’s defenders have—correctly—said that the deal does not stop the EU from taking measures against China should Beijing not uphold its side of the bargain. Yet an extraordinary naïveté (or, more cynically, a PR spin) appears to be running through the document. The press release welcoming the agreement contains much about the values and commitments that China has signed up to for the first time. It even carries the claim that China has agreed to make “continued and sustained efforts” to uphold international rules against “forced labour,” a reference to Beijing’s ongoing crackdown on Uighurs in Xinjiang. It’s hard to know what’s worse: including such feeble language on slavery or ignoring it.
And the early returns are not great. In the days after the deal was announced, China launched a fresh crackdown on prodemocracy protesters in Hong Kong and sent out invitations for a controversial “17+1” meeting between itself and an alliance of Central and Eastern European states, among them EU member states. Is China already dividing and ruling?
That other great German chancellor, Otto von Bismarck, once remarked that it was always better to be “one of two in a world of three.” Has Europe forgotten this advice? The bloc has many strengths, and has proved over time to be far more resilient than many of its critics dare admit—principally those in Britain who seemed to write it off as they pursued Brexit. But it also remains fundamentally weaker than either the U.S. or China, and risks being left behind by both.
Beijing’s goal, Henry Kissinger writes in On China, is not a decisive clash of forces, but “the patient accumulation of relative advantage.” Who out of China, the U.S., and Europe is most obviously accumulating relative advantage and enhancing its strategic position?
Europe may wish that it did not have to choose between the U.S. and China, but it might not be able to avoid it. Being in a two with a volatile America might well prove a better choice than being cast alone in the duopoly to come.
For Biden, meanwhile, the choice is easier because there isn’t one: His administration will engage and try to rebuild the transatlantic relationship. In the longer term, the greater challenge, however, might prove to be not European independence, but European weakness.