The new geopolitics: Annual report 2020
A few weeks after the 9/11 terrorist attacks, Tony Blair gave one of the most powerful speeches of his career to the Labour Party’s annual conference. “The kaleidoscope has been shaken, the pieces are in flux, soon they will settle again,” he said. “Before they do, let us reorder this world around us.” That shake of the kaleidoscope led to wars in Afghanistan and Iraq, with profound geopolitical consequences. The kaleidoscope was further shaken by the financial crisis of 2008-10. Now the global order is once again being stirred, as a consequence of four years of President Donald Trump and the COVID-19 pandemic.
This double whammy – like the earlier shake-ups – is strengthening an increasingly self-confident China but creating profound problems for the US and Europe. The liberal democratic values they espouse, and their leading role in international institutions, are being challenged. Can the arrival of Joe Biden as US president, and renewed momentum for European integration, restore the self-confidence of the Western democracies? This essay looks at 12 geopolitical trends that will matter for Europe.
1) The US’s reputation will take time to recover from the damage inflicted by Trump, but Biden will breathe new life into multilateralism.
Trump had his friends overseas – such as fellow strongmen Jair Bolsonaro, Narendra Modi and Benjamin Netanyahu. And he had a soft spot for dictatorial leaders like Vladimir Putin, Viktor Orbán, Mohammed bin Salman, Recep Tayyip Erdoğan and Kim Jong-un. Overall, however, Trump’s four years as president have greatly weakened America’s standing in the world. Most of its democratic allies found his antics – the incessant tweets and lies, the unpredictability and narcissism, the disdain for allies and international organisations, the America-first rhetoric and the policies that sometimes veered towards racism – contemptible. America’s image has suffered further from Republican leaders claiming that Trump had won the election, even after he had clearly lost, and from a majority of Republican voters believing that Biden cheated his way to victory. The US can no longer claim to be a shining beacon for democracy.
Meanwhile America’s handling of the COVID-19 pandemic has been among the worst: by January 2021 it clocked up 24 million cases and 400,000 deaths. As in other countries, failure to contain COVID-19 led to poor economic performance: having grown respectably during Trump’s first three years, the US economy shrank by 3.6 per cent in 2020 (though most European economies did much worse).
China's many admirers can argue that its authoritarian system of government delivers better outcomes than Western democracy.
The arrival of the more predictable Biden, who respects allies and takes multilateral institutions seriously, will improve the US’s image, at least in the more democratic parts of the world. But Biden’s ability to push through new legislation – for example on climate change – will be constrained by the Republicans holding half the seats in the Senate.
Most of Biden’s priorities will lie at home – fighting COVID-19, reviving the economy and trying to heal social divisions – where he will be in constant conflict and/or negotiation with Republican leaders. But Biden will have a relatively free hand in foreign policy, except where his policies require money or treaties in order to succeed. Biden will care much more than Trump about human rights and working with friendly nations. He will take international institutions very seriously, including the World Health Organisation (which the US will rejoin), the World Trade Organisation (which he will try to reform), NATO (which he will support unequivocally) and the EU (with which he will seek a constructive relationship). Under Biden, the US has returned to the Paris climate agreement and will play a big role in the COP-26 climate conference.
2) Every global crisis appears to strengthen China’s self-confidence. But its increasingly assertive foreign policy will produce a hostile reaction.
Despite its embarrassing cover-up of the early phases of the pandemic in Wuhan, China has performed relatively well during the coronavirus crisis. It has suppressed the virus, achieving a strikingly low death rate (officially, about 5,000 of the 1.4 billion Chinese have died of COVID-19). That medical success helps to explain China’s impressive economic performance: growth of nearly 2 per cent in 2020 and 8 per cent expected in 2021.
As happened during the financial crisis, China’s many admirers, notably in developing countries, can argue that its authoritarian system of government delivers better outcomes than Western democracy. China’s leaders, and as far as one can tell, many of its citizens, are convinced of that point.
China’s out-performing the West has reinforced Xi Jinping’s self-confidence and his emphasis on the importance of one-party rule, the need to combat Western ideology and the necessity of his own personal leadership. Economic success also makes it hard for cadres to oppose the centralisation of power in Xi’s own hands. In the coming years both a build-up of debt and an ageing population are likely to moderate China’s growth rate. Nevertheless China will remain politically stable for the foreseeable future, and – in relative terms – economically successful.
In the 21st century China has learned to play the multilateral game. Its citizens hold key jobs in numerous international bodies, such as the World Bank and the International Monetary Fund. Four of the UN’s 15 specialised agencies are run by Chinese nationals: the Food and Agriculture Organisation, the International Telecommunication Union, the United Nations Industrial Development Organisation and the International Civil Aviation Organisation. This is the result of patient diplomacy and the calling in of favours from countries that have received Chinese largesse, for example, in the Belt and Road Initiative.
In its efforts to show that it is a good global citizen, Beijing will probably sign up to ambitious long-term carbon-reduction targets. But it may talk the talk on climate change without walking the walk, at least in the short to medium term: it is likely to push ahead with plans for the mass building of coal-fired power stations, including in other countries.
China’s influence in international institutions is likely to continue growing. But its conduct while a member of bodies such as the UN Human Rights Council (where one term of Chinese membership ended in 2019 and another starts in 2021) has undermined their credibility in the eyes of some democracies.
Several Western countries are putting efforts into building up alternative formats that do not include China, such as the G7 and the ‘D10’, a putative democratic club that Britain is seeking to promote (the G7 plus South Korea, India and Australia). There is talk of establishing new bodies to set standards for the internet, data flows and artificial intelligence, with only democracies being invited to join. Biden has also said that he wants to convene a ‘summit of democracies’. But who decides which countries qualify for these bodies? And there are inevitably limits to what such organisations can achieve. Democracies often have widely diverging interests and in any case issues such as climate, trade and pandemics cannot be handled without China around the table.
Over the past few years China has become increasingly strident in its dealings with countries such as Japan, Vietnam, Australia, Canada and India, and much tougher in its approach to Hong Kong and Taiwan. Its relative success in tackling COVID-19 is likely to enhance its assertiveness. China appears unworried that it has poor relations with many neighbours, the exceptions including Russia (though there are plenty of mutual suspicions in that relationship) and Pakistan. China’s stridency will continue to worry its neighbours and may well push the ‘Quad’ – a grouping of the US, Japan, India and Australia that already organises joint naval exercises – towards becoming a more overtly anti-China bloc.
It is not only at the level of high politics that China’s domineering behaviour is provoking an adverse reaction. Chinese leaders appear indifferent to the fact that public opinion in Western democracies is swinging towards negative views of their country. The arrest of democracy activists in Hong Kong, the mistreatment of the Uyghurs and the repeated bullying of countries that displease China (such as the imprisonment of two innocent Canadians because their country detained the daughter of Huawei’s founder when the US charged her with fraud) have not helped China’s reputation.
In the long run this will matter: voters’ views may constrain governments when they decide whether to buy a sensitive Chinese technology, block an acquisition by a Chinese firm or approve a research project with a Chinese university. Similarly, the large multinationals that invest in China cannot ignore public opinion.
3) The economic and strategic rivalry between the US and China will dominate geopolitics – and pose problems for the EU.
China will welcome the greater predictability of Biden but may regret the departure of a president who did so much to damage Western cohesion. Trump adopted a much tougher approach to China than his predecessors, particularly on trade. Biden will keep much of that, since there is almost a national consensus in the US in favour of constraining Chinese power. He will drop Trump’s crude language and put a bit less emphasis on trade wars and tariffs, but he will be more critical of China on human rights. Biden may well continue Trump’s efforts to curtail China’s acquisition of advanced technologies, particularly those with relevance to defence or security.
There will be periods of détente and periods of escalating tension, but the Chinese and US economies will slowly decouple, at least in the area of tech. Trump’s decision to ban the supply of high-value microprocessors to China has motivated its leadership to accelerate plans to develop a more self-sufficient economy. China has now adopted a policy of ‘dual circulation’, meaning that for many key technologies and industries it seeks freedom from foreign supply chains.
The worse the tension between the two superpowers, the harder it will be for Europe to navigate between them: though it will remain strategically aligned with the US, it will be reluctant to forego close economic ties to China. Biden, unlike Trump, will be willing to work with Europe on shared concerns about China, whether on human rights, the theft of intellectual property or the unfair use of state subsidies. But although both the US and the EU have hardened their line on China in recent years, they will sometimes find it difficult to concert their efforts, since the US will nearly always be several notches tougher, and it will move more quickly.
This is because the EU member-states disagree on how to handle China (with some opposing a hard line), and because the US and Europe have very different perspectives. Apart from France and the UK, few European countries have any defence interests in the Asia-Pacific region, or would be willing to join the US in naval operations that challenge China’s claims in the South China Sea. The US is more strategic, seeing the rise of China as a threat per se, while the Europeans worry about China’s conduct (whether on human rights or the ways the state helps businesses) more than its strength. Europe is more dependent on trade with China than the US, and will always be keener to talk to it about global challenges such as climate and health, however unacceptable its behaviour.
Biden will put more emphasis than Trump on human rights, which will leave Russia with little choice but to line up with China geopolitically.
These tensions spilled into the open at the end of 2020, when – pushed strongly by German Chancellor Angela Merkel – the EU and China agreed on an investment treaty that had been seven years in the making. For China, this was a diplomatic coup, but Biden’s team were disappointed not to have been consulted. EU officials responded that nothing in the agreement – much of which copied an earlier US-China accord – precluded transatlantic co-operation on China; and that it was surely desirable for China to commit, at least on paper, to being transparent on state aid and licensing rules, and to promising to sign International Labour Organisation (ILO) conventions.
4) Russia and Turkey will continue to slide away from the West.
Russia will matter to its neighbours and to those Middle Eastern countries where it chooses to be active. It will sometimes use its seat on the UN Security Council to be disruptive. Its cyber-attacks will cause damage and its disinformation campaigns will seek to unsettle Western countries, for example by encouraging anti-vaccine movements. But in most respects Russia will remain a declining power, with an ageing, shrinking population. Despite the best efforts of French President Emmanuel Macron, Vladimir Putin has chosen not to take the steps required to bring about a rapprochement with the West, such as making serious efforts to resolve the frozen conflict in south-east Ukraine.
Biden has rolled over the New START treaty, which limits the numbers of nuclear weapons held by the US and Russia, and was due to expire in February 2021. But he will put more emphasis than Trump on human rights, thereby dashing any hopes that Putin may have had for a new partnership with the West. That will leave Russia with little choice but to line up with China geopolitically. But Putin will also continue to work closely with Turkey’s Erdoğan: although they support different sides in the Libyan and Syrian conflicts, they need each other against the West, and respect each other for being autocratic strongmen.
Russia will maintain the stable economic model that has endured for the past 20 years: its leaders show no signs of wanting to break its dependency on hydrocarbon exports, or the kleptocratic system that such an economy feeds. But with climate change policies eroding the value of its oil and gas reserves, and omnipresent gangsterism causing economic harm, living standards will erode slowly as Russia drifts into the Sinosphere.
Trump’s sympathy for Erdoğan prevented a serious bust-up between the US and Turkey over human rights, the conflict in Syria and the purchase of Russian S-400 missiles. Biden will be more willing to put pressure on Turkey, though he will also try to keep it as an ally. The EU has a greater need than the US to co-operate with Turkey, since the country is hosting nearly 4 million refugees, who could easily be nudged towards Europe.
Nevertheless EU leaders are increasingly fed up with Erdoğan’s undemocratic behaviour at home and his aggressive foreign policy – particularly his confrontational attitude towards Greece and Cyprus in the Eastern Mediterranean – and have moved towards taking a tougher line on Turkey. Its massive economic problems give Erdoğan every incentive to bolster his popularity through foreign adventures (such as the recent intervention in Nagorno-Karabakh). At the end of 2020 there were hints of Ankara seeking better relations with the West, but any shift is unlikely to be sufficient to restore friendly relations with US and EU leaders.
5) Trump’s defeat has not killed Trumpism.
In America, much of the Republican Party appears unwilling to throw off its infatuation with Trumpism. Its strong performance in the Congressional elections – and the conservative majority in the Supreme Court – may prevent the party from thinking that it has experienced defeat and therefore needs to change. The inevitable missteps by the Biden administration will energise Trumpians, while the moderate Republicans who backed Biden will hesitate before returning to a party that has abandoned their values.
Right-wing populism will burst forth every now and then, in one country or another. And in some places it is a semi-permanent fixture: Hungary’s Fidesz party, in power since 2010, was scoring around 50 per cent in polls at the end of 2020. In much of Europe the threat of right-wing populism appeared to diminish in 2020, partly because COVID-19 reduced immigration. But when the pandemic eases, migration will re-emerge as an issue across the globe. Populists will also exploit hostility to lockdown measures, outbreaks of jihadist terrorism, and concerns that policies designed to tackle climate change will make poor people poorer and require lifestyles to change. Furthermore, populists will benefit from the efforts of Russia and other countries to spread fake news through social media.
Meanwhile the economic drivers of populism remain potent: workers who perceive that globalisation has cost them their jobs or driven down their wages, or who experience worsening public services (as a result of austerity), are more likely to vote for the likes of Nigel Farage, Marine Le Pen or Matteo Salvini. COVID-19 has created new inequalities of health and wealth. In November, Public Health England reported that rates of infection and mortality from COVID-19 had been highest among the poorest sections of English society. The following month the ILO reported that in many European countries, those on the lowest incomes had suffered the greatest income reduction. At some point governments will withdraw their COVID-19-linked financial support and many firms will go bust, creating new groups of losers – who may become easy prey for populists.
6) The UK will face several very difficult years.
Britain is heading for a period of low growth, compared to its peers, because of Brexit and the damage inflicted by a much worse-than-average experience of the coronavirus. No large country in Europe has suffered a worse death rate. Of the world’s major economies, only Spain and Peru shrank by a rate comparable to the UK’s 11.5 per cent in 2020. And no developed country had a higher fiscal deficit than the UK’s 19.5 per cent of GDP.
Economic problems, Brexit and the widely-held view that the government has handled COVID-19 incompetently (the roll-out of vaccines excepted) will all put strains on the unity of the kingdom. The likely triumph of the nationalists in May’s elections in Scotland will make its independence a central issue in British politics. Meanwhile the sensitivities and technical complexities of the new frontier for goods going from Great Britain to Northern Ireland have already provoked political storms in Belfast, Dublin and London. The Commission’s inept – but brief – attempt in January to suspend part of the Northern Ireland Protocol, in a bid to prevent vaccines entering the UK via Ireland, has already led to calls for the protocol to be torn up. In the long run there may be more talk of a united Ireland.
The trade deal struck by Boris Johnson’s government with the EU was thin and economically injurious. At some point the British will search for ways of building a closer and more fruitful economic partnership. Like the Swiss, they will be engaged in permanent negotiations with the EU, decade after decade. Those Brexiteers who hope for the UK to evolve into a deregulated ‘Singapore-on-Thames’, with a very different economic model from that of Europe, will be disappointed: there will be little political support, including within the Conservative Party, for such a future.
On foreign policy, defence and policing, too, the EU and the UK are starting off their new life with minimal links. But in time – encouraged by Biden – they will build bespoke structures for co-operation, to facilitate information flows and to give both sides the chance to influence each other. The UK will often line up with the EU on questions of foreign policy, as part of a wider Europe – for example on Iran, the Middle East or climate. But sometimes it will follow the US – perhaps, for example, on China, since Johnson may wish to echo the tougher line of the US. And Britain will seek partnerships with other medium-sized democracies, such as Australia, Canada, Chile, Japan, South Africa and South Korea.
The risk for Britain is that its Brexit culture wars persist, dragging the country back to being inward-looking – and making it unattractive to much of the rest of the world. So long as the Conservatives manage to moderate their nativist-nationalist tendencies, Britain can be an outward-facing country, whichever of the main parties is in power. Then the British brand can emphasise the importance of attracting the best talent from around the world, to nurture the country’s scientific research base and universities. Britain can also focus on supporting the UN and other international bodies, leading global efforts to tackle climate change, pandemics and under-development, championing democracy and human rights, and promoting free trade and international law (though that last point is predicated on the UK avoiding further attempts to breach treaties, as it did with those parts of the Internal Market Bill that sought to over-ride the Withdrawal Agreement).
7) Although the political winds are blowing against globalisation, in many areas it will not go into reverse.
World trade declined by around 10 per cent in 2020, but is expected to rebound in 2021. Neither the partial decoupling of the US and China, nor the new Chinese emphasis on self-sufficiency, will shorten most international supply chains. US investments that would have gone to China are more likely to go to Vietnam or India than to create new jobs in America. In fact in many industries, such as cars, supply chains tend to be regional rather than global – electronics being an exception. Many companies wishing to keep down labour costs and to access cutting-edge technology will continue to invest overseas and manage international supply chains. The forced on-shoring of supply chains would raise prices for consumers.
Politicians throughout the developed world will find ways of regulating Big Tech more tightly, and making it pay more tax.
In some sectors, however, there is pressure to shorten supply chains. The pandemic made many governments keen to reduce dependence on foreign supplies of drugs and medical equipment. More common than the on-shoring of supply chains will be their diversification. The European Commission, for example, is concerned about Europe’s dependence on China for the supply of key rare earths. Meanwhile Biden wants to strengthen ‘Buy American’ provisions in public procurement contracts, in order to boost the resilience of supply chains.
European politicians, particularly in France, are increasingly prone to talk about ‘strategic autonomy’ in areas such as data, technology and finance. Some of them hope that ‘data localisation’ – ensuring that firms operating in Europe store data there, compliant with EU data privacy rules – will foster the emergence of European tech giants (others, and not only in the UK, fear that over-zealous rules on data privacy will hamper innovation).
The EU will increase its efforts to protect companies from ‘unfair’ foreign takeovers (for example, by Chinese firms benefiting from large amounts of state aid), and tweak its merger rules to encourage the emergence of European champions. The UK’s absence will enable the EU to become somewhat more ‘French’ or protectionist. But there will be pushback from free-traders such as the Nordic and Baltic countries, and sometimes from Germany, whose manufacturing sector – though increasingly fearful of Chinese predators – depends on an open global trading system. Germany is not the only ambivalent country: in the UK, traditionally a country suspicious of industrial strategy, ministers are talking of the need for national self-sufficiency in crucial areas.
8) The wealth and power of the tech giants, which COVID-19 has augmented, will be constrained.
The pandemic has made many of us more dependent on a small number of enormous digital companies, which have profited hugely. During the course of 2020, the market capitalisation of the five biggest companies rose from about 10 per cent of the total value of the US stock market – the historical average – to about 20 per cent.
Politicians throughout the developed world, with the EU in the lead, will find ways of regulating Big Tech more tightly, and making it pay more tax. In November the European Court of Auditors berated the European Commission for being too slow to move against Big Tech’s anti-competitive practices. But the Commission is slowly learning to flex its muscles. At the end of the year it launched its Digital Markets Act which will, among other things, seek to prevent dominant ‘gatekeeper’ companies from exploiting their position, for example by promoting their own services on their platforms at the expense of competitors. It will also force companies to share data with smaller rivals. And by laying down a list of things that companies should and should not do, the Digital Markets Act will allow the Commission to move more speedily against an offender, before it starts to harm consumers or competition.
Thinking along similar lines, the British government announced that a Digital Markets Unit, within the Competition and Markets Authority, would have the power to block or reverse decisions taken by tech giants. Another important new EU law, the Digital Services Act, will set out how large platforms should be responsible for removing harmful content – such as fake news, incitements to criminal behaviour or offers of counterfeit goods – and will prove costly to them. Companies that breach the EU’s two new laws face the prospect of massive fines, or even potentially of break-up.
The US appears to be following the EU in trying to limit the monopoly powers of these giants. The Justice Department and state prosecutors are investigating Google for alleged anti-trust violations, and considering forcing it to sell its Chrome browser. The Federal Trade Commission and 46 states are preparing anti-trust suits against Facebook, with a view to making it unwind its acquisitions of WhatsApp and Instagram.
Nevertheless Europe’s efforts to pursue tech giants are likely to create transatlantic tensions, since most of the companies concerned are American. The Commission’s attempt to get these firms to pay more tax is a case in point: in September 2020 it said that unless the OECD agreed on an international framework for a digital services tax, it would propose an EU-wide regime. In November, France said that it would press ahead with its own digital tax without waiting for the OECD to come up with a plan – prompting the US to threaten French exports with punitive tariffs.
It is not just Europeans and Americans who worry about the power of tech giants. Over the past decade China has blocked its people from using Google, Facebook, Twitter and Instagram. Then in November 2020 Chinese regulators stepped in to halt a $37 billion initial public offering from Ant Group, an online micropayments firm controlled by Alibaba. The following month regulators launched an anti-monopoly investigation into Alibaba. The precise reasons for these moves are unclear, but the Communist Party seems to have become worried about the wealth and independence of Alibaba and its colourful boss, Jack Ma.
9) The eurozone will integrate further, but the EU’s efforts to forge common rules for handling migration and to unify foreign policies will prove problematic.
The first wave of the pandemic hit the EU asymmetrically, causing more casualties, longer lockdowns and greater economic damage in Southern Europe. The situation in much of the south was worsened by dependence on the badly-affected tourism sector. This asymmetry exacerbated tensions that had never abated since the euro crisis emerged in 2010: southerners felt that they had had to swallow excessively painful medicine, while northerners refused to accept that a healthy eurozone requires more balanced growth, risk-sharing among its members and in extremis transfers to poorer countries. The migration crisis of 2015-16 had further inflamed north-south tensions since it affected Italy and Greece particularly badly.
Ever since becoming French president in 2017, Emmanuel Macron had tried to persuade Germany to agree to some sort of joint fiscal spending by the eurozone. Finally, in the summer of 2020, with some help from Commission President Ursula von der Leyen, Merkel agreed to a one-off €750 billion recovery fund for the entire EU. The money will be raised through issuing common EU bonds, backed by the EU budget, and spent on grants and loans to boost investment, mainly in poorer member-states in the south and east of the EU. The fund is playing an important political role in diminishing north-south tensions. If well managed, the recovery fund also promises to play a significant economic role in helping the most ravaged member-states, and similar structures may be used again in future crises.
A healthy eurozone needs further reforms, but some progress is being made, for example on the banking union. In November 2020, EU ministers agreed to change the European Stability Mechanism (a fund that has been used for sovereign bail-outs) so that it can back up the Single Resolution Fund (which helps to restructure banks in trouble). Other reforms, such as the gradual introduction of an EU-wide system of bank deposit insurance, are also on the cards.
Elsewhere, future European integration looks more difficult. There is a strong case for the EU to construct a common system for the handling of asylum-seekers and irregular migrants, rather than having them pile up in camps on the EU’s southern borders, and the member-states treating them in different ways. Indeed, without a viable framework for internal solidarity, countries on the EU’s borders will find ways of repelling migrants – whether it is Greece pushing back boats or Italy striking deals with Libyan militias. A lack of progress will endanger both the Schengen area of passport-free travel, and the single market principle of free movement.
For more than five years the EU has been trying to revamp its so-called Dublin regime for dealing with asylum-seekers, and to decide upon a fair system for distributing refugees. But the talks are blocked, because of the refusal of some of the Central Europeans to accept quotas of refugees or to contribute financially; and the insistence of others, like Germany, that some sharing of responsibilities is essential. The Commission proposes that countries which object to taking refugees should be allowed instead to ‘sponsor’ returns – by organising return flights or persuading countries of origin to take back unsuccessful asylum-seekers.
Both the member-states where the migrants arrive and those where they tend to end up (including Germany) are increasingly fed up with the Central Europeans’ reluctance to share responsibility. If the latter keep spurning participation in a common system they may find themselves excluded from the Schengen area; the pandemic has already led to checks re-emerging on national borders within that area. In the coming years the EU is likely to make some progress towards common rules on the handling of migrants – but whether the 27 can stay together on this issue is an open question.
If the Central Europeans keep spurning participation in a common system they may find themselves excluded from the Schengen area.
The prospects for significantly more effective EU foreign policies do not look good. In too many parts of the world, such as China, the Middle East and Russia, the member-states start from very different positions (though in the last of those cases, the 27 have maintained a united position on sanctions). And the bigger member-states are reluctant to see the EU institutions play a leading role.
Ursula von der Leyen has led calls for the introduction of majority voting on sanctions laws and statements on human rights. There is a clear logic to such a reform, so that, for example, the vetoes of Cyprus on sanctions against Belarus, and Hungary on criticism of China’s human rights record, cannot be repeated. But given that a single member-state can block the introduction of majority voting on foreign policy, this reform is unlikely to be achieved in the foreseeable future.
The best prospects for common foreign policies probably lie in the EU’s neighbourhood: the Western Balkans, the lands that lie between Russia and Poland, the Levant, the Maghreb and the Sahel – places where meddling by the likes of China, Russia and Turkey, the persistent problem of migratory flows and the risk of terrorism make effective EU action urgent. Furthermore, Biden will encourage the Europeans to take on greater responsibility for their own neighbourhood, so that the US can focus on other parts of the world.
10) The rift between most member-states and some of the Central Europeans will not heal any time soon.
In recent years, many member-states and the EU institutions have become increasingly concerned about the Polish and Hungarian governments’ abuse of democratic principles – in areas such as independence of the judiciary and media freedom. Poland’s de facto leader, Jaroslaw Kaczyński, and Hungary’s prime minister, Viktor Orbán, have worked together to prevent the EU from applying the treaties’ Article 7 procedure against their countries. This procedure allows the imposition of penalties on a country “in serious and persistent breach…[of] EU values”. But sanctions would require unanimity in the Council of Ministers (excepting the accused country) and have therefore not happened.
So in 2020 the governments most concerned about the rule of law, and the Commission, came up with a new approach. The EU adopted (by majority vote) a law that ties the money available in the new seven-year budget cycle and the recovery fund to compliance with rule of law conditionality. This upset the Polish and Hungarian governments, which hit back by vetoing the budget and the fund. The Commission and some governments considered reconstituting the fund without Poland and Hungary. But in December that pair lifted their vetoes, when EU leaders offered them various reassurances, including a promise that the Commission would not implement the conditionality procedure until the European Court of Justice had ruled on a challenge to it.
These arguments reflect deeper, cultural divisions on the continent. Orbán and Kaczyński, along with others like Prime Minister Janez Janša in Slovenia, have been overtly pro-Trump. In most Central European countries, including the Czech Republic and Slovakia, there is strong opposition to accepting refugees from the Middle East or North Africa. The societies of Central Europe have no tradition of multiculturalism – and they tend to be more opposed to the immigration of those who are ethnically and religiously different than societies in Western Europe. Similarly, they are more hostile to gay rights and liberal social values. Climate change is yet another source of division, with the Central Europeans – many of whom burn a lot of coal – reluctant to sign ambitious targets for curbing carbon emissions, for fear of bearing too much of the economic and social cost.
11) France and Germany will continue to lead Europe, with France having the edge over the next few years.
In recent years the Franco-German partnership has been troubled, partly because of French frustration with Germany’s reluctance to take radical steps on eurozone governance. Macron wanted to make big changes to the way the EU worked, but Merkel was more or less satisfied with the status quo. Then in the summer of 2020 Macron and Merkel came together to forge an agreement on the recovery fund. Since then, despite inevitable tensions, they have often worked well together.
Brexit means that France and Germany will remain unchallenged as the dominant duo of the EU. Italy and Spain cannot easily stand in their way, because COVID-19 has weakened their economies (though if new prime minister Mario Draghi imposes some order on Italy’s unstable political system, the country will grow in influence). Poland’s government cannot lead Europe because it is at odds with other EU countries on so many issues.
The Netherlands’ Mark Rutte has emerged as one of the more influential leaders, because of longevity – he has been prime minister since 2010 and is likely to win the general election in March; because the Dutch economy is relatively large and successful; because Brexit has created a space for the Netherlands to fill, as the champion of economic liberalism; and because Rutte has led or helped to organise groupings of small and medium-sized North European countries – the ‘frugal five’ that oppose a larger EU budget, and the ‘Hanseatic league’ that includes the Nordic, Baltic and Irish governments and is wary of both deeper eurozone integration and EU rules on taxation.
The EU institutions lack sufficient standing to lead the Union – though von der Leyen has shown that she can be influential when working with Paris and Berlin, as on the recovery fund. So if anyone is going to set the agenda it is likely to be France and Germany. However, their leadership, though necessary, is not always sufficient to bring about change, as the Polish-Hungarian veto of the recovery fund (though subsequently lifted) illustrates.
Some Italians, Poles and Dutch find the Franco-German duo’s pre-eminence unpalatable, as do a number of smaller countries, but they have to accept it. Spain seems more relaxed: Prime Minister Pedro Sánchez – like his predecessor of 30 years ago, Felipe González – sees himself as a smaller wheel on the Franco-German axis.
For the next few years France may well be the more influential of the pair. Germany will be distracted by Merkel’s imminent departure. The Christian Democratic Union (CDU) and its sister party, the Christian Social Union, must choose a Chancellor candidate. The distraction will continue with the general election in September 2021, and then quite possibly with several months of tortuous coalition negotiations.
Merkel has built up immense stature in the European Council, because of her long experience, common sense, patience and skill at crafting compromises. Her replacement – whether new CDU leader Armin Laschet or someone else – will be incapable of playing such a pivotal role, at least for several years. For example, Merkel has often acted as a bridge between the Central Europeans and the rest of the EU, as when she led efforts to resolve the stand-off between the Polish-Hungarian duo and the rest of the EU over the budget and the recovery fund.
Meanwhile Macron has become the EU’s most dynamic and energetic leader. He would be even more influential if he could find the patience to consult partners before pursuing new initiatives – for example, in the summer of 2019 neither Warsaw nor Berlin was consulted on his scheme to reach out to Putin. But the fact that he is an inexhaustible fountain of ideas – even if many of them fall on stony ground – and that he pursues them with vigour and determination, gives him considerable heft within the EU. He stands a good chance of being re-elected in May 2022. He will use France’s EU presidency in the first half of 2022 as a platform for promoting French ideas.
As already noted, the EU’s trade policy is increasingly French-driven, with more people in Germany coming round to the idea that Europe needs ‘champions’ to stand up to Chinese and American competition. Post-Brexit, France is the unchallenged leader of the EU on security policy. Macron also leads the debate on ‘strategic autonomy’(see below). And although most of the competences for countering terrorism, integrating immigrants and combating Islamist extremism remain national, to the extent that there is an EU approach, it is increasingly close to Macron’s hard line.
12) The EU will spend a lot of time discussing ‘strategic autonomy’ and what it means.
The EU is likely to make some progress towards developing greater capacity in security and defence, but how much is an open question. In 2020 Josep Borrell, the EU’s High Representative for foreign policy, defined strategic autonomy as “the ability to think for oneself and to act according to one’s own values and interests.” In 2016 the Council of Ministers said it was the “capacity to act autonomously when and where necessary and with partners wherever possible”. Trump’s departure has taken away a strong motivator for European leaders: four more years of him would have persuaded some of the most sceptical that Europe needed to become more self-sufficient on matters of security. But the fact that Trumpism is clearly not dead may continue to prompt European leaders to think seriously about strategic autonomy.
Emmanuel Macron has been Europe’s chief proponent of the idea – and in his thinking it means not only military power but also more broadly the on-shoring of crucial supply chains, the fostering of high-tech and digital companies within the EU and the avoidance of energy dependency on one or a few suppliers.
The EU and the UK should focus more on the challenges of working together to defend Western values in an increasingly hostile world.
The difficulty for Macron and the EU officials who share his analysis is that some politicians – particularly in Central Europe and the Baltic states, but also in Germany (such as defence minister Annegret Kramp-Karrenbauer) – fear that strategic autonomy is an anti-American concept. They worry that, if pushed too far, the idea could encourage the Americans to disengage from Europe. Macron will need to try harder to convince the Poles, in particular, that more European defence need not mean weakening NATO. Indeed, if Europeans can learn to do more for themselves militarily, they will become more useful partners for the US.
An increasing number of Germans are warming to the idea of strategic autonomy. Merkel often says that Europe will have to take on more responsibility, in both diplomacy and military affairs. But Macron is likely to become frustrated that few German politicians are willing to vote for significant increases in defence spending.
Advocates of strategic autonomy should argue that while Europe can hope that Biden and those like him will continue to run the US, there is a risk that Trumpism will return. Furthermore, there is also a danger that China will become so powerful that it will be able to bully the EU into following its wishes. What Beijing is doing today vis-à-vis Australia – blocking imports of its goods and raw materials, in an effort to persuade Australians to stop criticising the Chinese government – could presage its future treatment of Europe.
Strategic autonomy should therefore be an essential insurance policy against such dangers. The concept will be more effective if EU governments can find ways of linking the UK to their foreign and defence policies. That is not on the cards at the start of 2021 but may become viable when, in the future, there is more mutual trust.
Conclusion
At the start of this essay we asked whether Biden’s presidency and further European integration could restore the West’s self-confidence – or, to put it another way, strengthen the rules-based international order. Some of that order’s key pillars stand outside North America and Europe, such as Japan and South Korea. However, just as leadership by France and Germany is necessary but not sufficient for the EU to make progress, so effective EU-US co-operation is a sine qua non for a healthy West.
For both Americans and Europeans, sorting out their internal problems is probably more important than crafting the right foreign policies. The US paid a heavy price for mismanaging the wars in Afghanistan and Iraq, but it has suffered just as much or more damage from the financial crisis, four years of Trump and its poor response to COVID-19. If Biden can find sufficient numbers of moderate Republicans to work with on restoring the US to being a predictable, principled and successful country, the West’s narrative will benefit hugely.
But Europe also has a key role to play in reviving the attractiveness of the liberal democratic model. It too needs to focus on fixing its internal problems. Europeans need to work on integrating their capital markets, becoming more entrepreneurial and innovative, and curbing inequalities. The EU also needs to build on the success of the recovery fund to strengthen eurozone governance. It must find ways of bridging the gap between the eastern and western parts of the continent – without betraying its commitment to the rule of law. It will always face large numbers of immigrants from poorer countries, but unless it finds better ways of coping with them its internal rifts will worsen, and it will look incompetent to the rest of the world.
The EU and the UK need to take a more strategic approach to their relationship: they should focus less on fish quotas and the minutiae of dispute settlement mechanisms, and more on the challenge of working together to defend Western values in an increasingly hostile world. As for the EU’s other neighbours, it will need to find ways of motivating them to reform, without – in many cases – being able to offer the prospect of membership. That could mean offering more money, market access, political contacts and participation in selected EU policies.
If the world judges North America and Europe to be well-managed and successful continents, it will have more respect for the democratic principles they espouse. Of course, it is not only their internal performance that matters for the West’s image. It would help if Americans and Europeans avoided starting unnecessary wars. They should also take the lead in tackling global challenges such as climate change, pandemics and under-development. It should not be beyond the wit of Biden and European leaders to make their liberal democratic model more appealing than China’s authoritarian system.
Charles Grant