IFF Remarks on Deepening China and EU Economic and Financial Cooperation

The title of this session is leadership dialogue and the focus is “deepening China and EU economic and financial cooperation” in what this forum is calling the new global context. I’d like to use my time to look briefly at two dynamics that are affecting the evolution of this China/EU cooperation and then conclude with a comment about the importance of political leadership for quality outcomes as well as for a more peaceful world order.

If Christopher Jeffery will permit, I also will go a bit afield and talk about the importance of the US/China relationship to these dynamics.

The first dynamic is the geopolitical context today as suggested by the tension – now at a high pitch - in the US/China relationship. The second dynamic is the multiple uncertainties which are aggravated by this tension and which reflect the realities of a global shift that’s underway. That global shift is from a US-centric, unipolar world order to a multipolar world order that is not singularly dominated but has multiple centers of economic and political gravity, including China.  

Reading China Daily on Thursday after arriving in Guangzhou from San Francisco, I noted two articles that I thought were supportive of the idea of a deepening China/EU cooperation – one having to do with mutual technology interests in China and Germany, and the other having to do with trade negotiations between China’s Ministry of Commerce and their counterparts at the European Commission following the visit to Beijing by French President Emmanuel Macron.

Granted, these may be early steps in the larger scheme of things, but I read them to be important steps in what is likely to be a long and hopefully successful economic journey. In the spirit of this session’s topic of leadership, they also suggested to me that the political leadership on both sides is being responsive to domestic economic interests, is setting a direction, establishing incentives, addressing barriers, and seeking outcomes that can set the China/EU economic cooperation on a mutually beneficial course. That is good leadership.

I would offer that these small steps also reflect aspects of the geo-political reordering that is taking place. It is a reordering that reflects a shift due to the diminishing influence of the US on the world stage and the rise of others, each with implications for the larger order of things.

Why do I point this out here and now, given that today’s topic here is narrowly focused on China/EU cooperation? My interest draws on the work I started in 2002 at the prestigious American Academy in Berlin and continue today. This work began a public policy fellow focusing on the implications of a rising China for the transatlantic relationship.

My interest is also personal as the granddaughter of Dutch immigrants who migrated to America in the early 20th century - and whose career today continues to be defined today by the quality of America’s foreign relations and the capacity and effectiveness of our international relations with others, including and especially China as well as Europe.

To my surprise and concern, two decades out from my experience in Berlin, there are now persistent questions around what was once an unassailable, airtight assumption of US/European foreign relations. Today, the tenor of the relationship is one of unease, which in my view is attributed in no small part to the actions of the Trump White House and the president’s entourage of America Firsters. By the same token, the change in the tenor of the relationship also reflects the causes and consequences of this larger shift from a unipolar to a multipolar world order.

So it is with a shift of such magnitude, that the changes it delivers will include uncertainties of equal - if not greater measure. To deal with these uncertainties will take the full measure of political and diplomatic leadership and the recognition that resolution of our differences is not a choice - but a necessity.

At the top of my list of uncertainties is the tense relationship between the world’s two largest economies. The longer the leaders and their representatives choose to participate in such high-pitched rhetoric about one another, the greater the chances for unintended consequences with very unhappy outcomes. Would that both sides could find ways to ratchet down the tension, attempt to truly understand the other’s position as well as our respective traditions and culture, and determine how and where accommodation is possible. This, by the way, is in keeping with good leadership.

For Washington’s part, President Trump has cast the relationship with China as a multi-domain, strategic competition. This is in sharp contrast to the last 40 years of engagement policy. Engagement was the policy that anticipated that China would continue to rise - and continue to do so as a responsible stakeholder in the liberal world order. For Beijing’s part, recent actions have raised questions in the minds of people who prize openness as a core American strength as to the intent and direction of a rising and power country. Instead of engagement, we are like ships passing in the night.

The stark contrast with what was engagement underscores uncertainties and fears that what has been accomplished in this complex relationship will be lost. It is more so given that together, the United States and China have woven a dense fabric that is at the heart of globalization and globalization’s international supply chains that are based on genuine economic advantage. In turn, globalization has been an engine for world peace. Despite the uncertainties and fears raised by the prospect of its absence, today’s discourse has taken a very different and disturbing tone.

For starters, America finds itself in the “midst of a strategic panic”. That’s how a prominent American academic describes the state of play in the US today. Americans are deeply unsettled and divided. The times today are reminiscent of the 1960s and the divisions that cleaved our society at the time of the Vietnam War. What is needed as was needed then is for the leaders on both sides of the conflict to start to find solutions by first ratcheting down the rhetoric about the other’s antics and chest thumping.

It is time also to resolve the trade issues that divide America and China, and if we cannot resolve the full set of issues, then let negotiators resolve to ultimately resolve outstanding issues. At the very least, we need to draw a line under the dispute. It also is time to manage trade in its own context and not in a larger multi-domain, strategically competitive context, that is if we are to ever get past present uncertainties.

After the US/China trade dispute, next on my list of uncertainties and on point with our conversation here, are the events today in the United Kingdom and in Europe. I believe Britain is going to finally leave the European Union and that will deliver its own set of unsettling consequences for the regional economies as well as for the global economy. It will change how business, finance, investment and trade get done. It will affect the context and quality of the transatlantic relationship, a prized alliance influentially in support of world peace since the end of World War II.

In Germany, meanwhile, Angela Merkel is now serving out her final years as chancellor. She has had a long and admirable career as the head of state. Her tenure has been exemplary including the fact she is but one in a line of German heads of state who have supported a stronger transatlantic relationship. This line of chancellors dates back to Konrad Adenauer, Germany’s first peace-time chancellor post World War II. She and each of the modern-day German leaders who preceded her, met the unique challenges the alliance presented only to see the alliance emerge stronger, unassailable in its resilience. Today, Merkel’s departure will be accompanied by soul-searching questions inside Europe and the place the European Union will want to find for itself in today’s emerging multipolar world order.

Next on my list of uncertainties is today’s marketplace, which the British Economist magazine has taken to describe as a marketplace in the throes of its own “age of anxiety.” Yes, the world economy has continued to grow, but the growth is lopsided and includes centers for dynamic growth that are today under pressure, notably in Asia. Important economies like Germany are showing signs of a recession. Trade tensions continue. Impeachment of President Trump looms 

in a self-absorbed Washington. Investors, particularly pension funds, worry deeply about the consequences of near negative and negative interest rates for their portfolios. All these factors are contributing to an unsettled market.

Uncertainty is never very pretty. It also requires creative resolution that in turn requires hard work on the part of leaders who must be committed to purposes that are larger than a single set of interests in a single country or region. The ultimate goal of world peace requires that they set the direction, provide appropriate incentives domestically, build alliances and drive toward a larger purpose of peace and prosperity. Those words, uttered often, take on new meaning in today’s uncertain context in need of strong and positive leadership. Thank you.