Is Europe prepared to embrace greater sovereignty in light of the pivotal changes brought about by Trump?

Europe stands poised to seize control of its own future. We must not allow ourselves to be reduced to a mere pawn in the grand tapestry of history. Ursula von der Leyen, the President of the European Commission, adopted a lofty yet familiar tone as she unveiled her proposal for a European armament program a mere fortnight ago.

The European Union is keen to achieve a sense of “strategic autonomy” or “sovereignty” in the realms of armaments and defence, particularly in light of the increasing disengagement of the American government from NATO. However, they are not alone in this regard.

In the wake of the coronavirus pandemic and following the Russian invasion of Ukraine, the European Union has come to grips with the significant issues stemming from its prior reliance on China and Russia. “A significant portion of European industry relies on exceptionally low-cost energy sourced from Russia, inexpensive labour from China, and heavily subsidised semiconductors from Taiwan,” remarked former EU Commission Vice President Margrethe Vestager.

Since the onset of Donald Trump’s second term as President of the United States, there has emerged a heightened awareness that relying on the United States for security is no longer a viable choice. Trump perceives himself not as a collaborator with the EU in various domains, but rather as a rival. This is evidenced by the tariffs that have already been announced, as well as those that are yet to come.

Europe finds itself compelled to reassess its autonomy and sovereignty. Is the European Union prepared for this economically? In the parlance of Brussels, following the de-risking of China, the de-risking of America has now emerged as a topic of discussion. However, von der Leyen would never use such terminology and, in contrast to China, would certainly not categorise the USA as a “systemic rival”.

This shift is chiefly evident in the Commission’s methodical engagement with various partners beyond the confines of the United States and China. The swift finalisation of the trade agreement with the South American Mercosur nations after Trump’s election in November marked a significant milestone on this journey, one that transcends mere trade relations. It pertains to influence, in both geopolitical and geoeconomic contexts.

The European Union is in pursuit of new alliances

The subsequent phase involved a collective journey of nearly the whole Commission to India, scheduled for the end of February. This, too, led to a definitive pledge for a swift resolution of the trade discussions by year’s end. The summit between the EU and South Africa took place in mid-March. Von der Leyen has unveiled a fresh financial package amounting to €4.7 billion through the “Global Gateway” initiative, aimed at positioning Europe as a counterbalance to the Chinese Silk Road Initiative.

Next week, von der Leyen is set to embark on a journey to Uzbekistan alongside Council President António Costa for the inaugural EU-Central Asia summit. This event will take place right after Trump’s declared “Liberation Day,” during which he intends to unveil the next round of tariffs. The message is unmistakable: The EU is on the lookout for new allies in pursuit of enhanced sovereignty. “In a world that grows ever more perplexing and disjointed, the EU’s most sensible course of action, according to Costa, is to forge robust partnerships aimed at fostering peace and prosperity.”

However, the most significant impetus to take action lies in the realm of defence. Europeans are confronted with a tangible menace from Russia and can no longer depend on American backing. Prior to Trump’s second inauguration, the dominant perspective among EU member states was that Europeans ought to counter the Russian threat through NATO rather than establish parallel frameworks. This assumption is no longer valid. The notion that the European Union is, in principle, not accountable for defence matters is gradually receding from the forefront of discussion.

“Prepared for defence” by 2030?

Robust political assertions suggesting that the European Union, comprising 449 million residents, ought not to be swayed by the United States, which has a population of 342 million, are ultimately unproductive. Particularly given that the Americans are significantly ahead of their European counterparts in terms of economic strength and also lead the way in defence expenditure.

Von der Leyen aims to ensure the EU is “defence-ready” by the year 2030. The projected timeline is informed by intelligence assessments indicating that Russia is expected to be in a position to initiate a new conflict by the year 2030. It is imperative that Europeans work together to the fullest extent in the future and significantly enhance their military capabilities. The proposals have received the green light in principle from the heads of state and government of the EU.

The Commission President dismisses fanciful notions like the establishment of a European army. She asserts that member states consistently maintain responsibility for their forces. She perceives the primary objective of the EU in the immediate future as addressing “capability gaps”. This entails, on one side, the replenishment of exhausted stockpiles with missiles, ammunition, artillery, and air defence systems.

Conversely, it is imperative for the EU to cultivate military capabilities that are presently absent, thereby reducing its reliance on the United States. This notably pertains to drones and their defence, “offensive cyber capabilities,” as well as the application of military artificial intelligence and quantum computing.

“There is a pressing need for military autonomy.”

Sven Biscop, a political scientist at the Belgian Egmont Institute for International Relations, asserts that the EU will not possess these “strategic enablers” in their entirety by 2030, thus continuing its reliance on the United States. Biscop cautions that the EU will similarly struggle to fill the void left by American intelligence during this time. This indicates that it won’t be prepared until at least 2035.

However, it remains true that von der Leyen is heading in the right direction. “There is a pressing need for military autonomy.” “This indicates the capacity to carry out military operations independently of US support,” remarks Biscop. An illustrative instance of these capabilities is France’s nuclear-capable Rafale jets, which notably lack any American components.

The Commission President holds the view that the scale, expense, and intricacy of pertinent military initiatives significantly surpass the capabilities of individual member states. Nevertheless, the EU might acquire fresh autonomy via collaborative initiatives. This encompasses the collaborative advancement of substantial, government-funded initiatives, as well as collective purchasing efforts. There is optimism in the potential for enhanced buyer power, leading to more economical purchasing options.

The proposals put forth by the Commission also include particular autonomy stipulations, suggesting that acquisitions should be conducted within Europe, essentially advocating for a “Buy European” approach. In principle, weapons ought to be procured solely from firms located within European Union or NATO member states. Furthermore, it is required that no less than 65 percent of a product’s cost can be traced back to components sourced from within the EU.

Upgrading exceptions

Von der Leyen plans to fund collaborative initiatives primarily through a newly established €150 billion community fund dubbed “SAFE.” It will secure loans from the EU budget and distribute them to the member states. The premise here is that numerous nations could secure funding for their projects at more favourable interest rates than if they were to issue bonds independently. According to the Commission, twenty of the twenty-seven EU member states stand to gain from this initiative.

Nevertheless, the disparities in interest rates between the majority of nations and the EU are quite minimal, meaning that only a handful of countries with a notable risk premium, like Hungary and the Czech Republic, are poised to gain substantially.

The €150 billion from the SAFE Fund represents the sole financial resource that the EU Commission can directly allocate for defense-related issues. In the meantime, Von der Leyen has advocated for a substantial €800 billion allocation for military expenditure by the year 2030. The outstanding €650 billion hinges on the expectation that member states will substantially increase their own defence investments and embrace the Commission’s proposal for exemption from EU budget regulations concerning these expenses.

It remains to be seen whether this hope will endure. The CDU/CSU and SPD have relaxed the debt brake concerning defence in Berlin. Nonetheless, there remains a notable hesitance regarding von der Leyen’s financial package, particularly among the EU member states that are already grappling with significant debt burdens.

Several member states within the EU are facing challenges regarding the Commission’s efforts to establish new alliances. The European Union must inevitably enhance its trade connections with the global community if it aims to safeguard its access to vital raw materials and diversify its economic partnerships.

The authors of a study conducted by the Kiel Institute for the World Economy for the Heinrich Böll Foundation contend that enhanced trade with nations like Canada, Mexico, Japan, South Korea, and Vietnam—each already bound by trade agreements with the EU—coupled with a modest five percent decrease in non-tariff trade barriers, could mitigate the repercussions of a trade conflict with the United States.

Nevertheless, acknowledging the advantages of international trade does not automatically lead to the establishment of new trade agreements. It remains to be seen whether the Mercosur agreement will secure a majority among EU member states. In nations such as France, the Netherlands, and Austria, there exists a palpable anxiety regarding potential farmers’ protests in response to competition from South America. The extent to which the EU can truly reclaim economic sovereignty by forging closer trade ties with other nations while simultaneously distancing itself from China and the USA remains uncertain.

In a striking contrast to the burgeoning trade relations, the European Commission is endeavouring to assert greater sovereignty, notably through heightened protectionist measures. It set out on this course during von der Leyen’s initial term in office. Relevant initiatives were crafted as a European reaction to both perceived and actual American industrial policy, all in the name of bolstering the competitiveness of the German economy.

The notion here is that the European economy ought to achieve a degree of independence from both America and China, particularly in crucial sectors; this necessitates governmental backing and safeguarding. Instances encompass the stipulations for preferential treatment of European products established in the EU Raw Materials Act, alongside the “Net-Zero Industry Act” aimed at fostering green technology.

This trend persists in recent undertakings like the “Clean Industrial Act.” This development also encompasses the declaration to ease merger regulations with the aim of fostering European champions. The Commission, in its external dealings, safeguards industry against what it perceives as excessive Chinese overproduction by imposing tariffs. In light of the inadequacies present, von der Leyen is keen to unleash a substantial competition fund, aiming to bolster support as part of the forthcoming multi-annual EU financial framework.

The concept of sovereignty, when viewed through this lens, bears a striking resemblance to the traditional industrial policies that have their roots in French thought. Von der Leyen, nonetheless, finds herself grappling with the evident remedy for enhanced sovereignty: fostering competitiveness via deregulation. Although her initial proposals for cutting bureaucracy surpassed any other efforts in recent years, they are still not regarded as a significant step towards liberating the economy from superfluous regulations. Philipp Eckhardt from the Centre for European Politics articulates a sentiment shared by numerous economists, characterising the proposals as merely “a small step”.

Author: Hendrik Kafsack; Source: FAZ.