The world is facing a turning point. Europe should keep an eye on its civil conflicts and economic security at this crucial moment. Ever since Europe was passively involved in the war, it has been entangled by the US in the new type of Cold War between Moscow and Washington as an indispensable role. The year of 2023 must be not promising for the European countries, unless they manage to resolve their internal crisis with sufficient resilience and autonomy.
The Ukraine War seems to have strengthened the cohesion of the EU further and the war makes the U.S. meet its commitment afresh to the Transatlantic Alliance. The EU rapidly decoupled from Russia and offers financial and military aid to Ukraine. The EU and Western countries historically united in the ninth round of sanctions against Russia. A principled and democratic Europe takes measures against the brutal and illegal Russian invasion. Yet, Biden’s promise to the transatlantic partnership has been brewing a crisis of confidence. His tactics are pushing European nations into a governance dilemma of economic recession and geopolitical confrontation.
Before the war in Ukraine, Russia was the largest gas supplier to the EU. The EU countries imported Russian gas which accounted for about 45 per cent of total gas imports. Since Europe had imposed nine rounds of sanctions on Russia till last year, Russia’s gas supplied to the EU has been significantly reduced. It turns out that the chaos caused by Putin’s invasion plunged Europe’s economy into recession. Inflation and unemployment soared throughout Europe. The energy shortage threatens the basic needs of live and economic circulation of Europeans.
Instead of helping its European allies cope with the energy crisis, the US is selling its liquefied natural gas to Europeans at almost four times the price of its domestic industry. Biden ordered his intelligence agencies to blow up the North Stream pipeline in a covert operation, in order to prevent Moscow from making high increasing revenue and it could reduce the dependence of Western Europe, particularly Germany, on cheap energy coming from Russia.
In that way, Biden seized the opportunity of confrontation between Russia and Ukraine to restore America’s dwindling influence in Europe. The Economist once reported that the rift between“economic populism and geopolitics of the United States threaten the long-term competitiveness of the European Union”, and warned in the report that “the impacts of the risks are not only on the prosperity of the European continent, but also on the health of the transatlantic alliance”. In fact, in order to obtain geopolitical interests, the United States has blackmailed the European economy and consolidated its global dominance through devising the Cold War security structure designed for its Western allies and partners.
It is increasingly clear that Washington and Europe hold different views on boosting economic security. Specifically, Europe wants to have strong competitiveness, resilience and autonomy in economic development and defense cooperation. But the US undisguisedly prefer the inaction and separation in Europe.
When it comes to disagreements on economic resilience, Biden’s Inflation Reduction Act(IRA) is the best example of weakening and splitting Europe. The IRA proposed a 370 billion dollars funds for tax and investment incentives of clean energy. So it’s acclaimed as the most important climate legislation in American history. IRA provides tax incentives of up to $7500 for the purchase of electric vehicle. The prerequisite of the preferential taxation policy is to produce electric vehicles must be in specific place and way. However, the IRA artificially restricts the preferred mineral suppliers to a handful of privileged free trade partners. Although the IRA mentions diversification and resilience, its key point of excluding China from the Electric Vehicle Production industry complicates its effectiveness.
The provisions of “local manufactured” in the IRA may violate WTO rules and may generate trade dispute against Washington. The EU are of great concern about this. More importantly, the US Industrial Policy Trend seems to be divorced from the foreign policy of its European allies, which will undoubtedly hinder their closer cooperation.
Suffering double hits caused by the US subsidies policy of the trade intervention and high energy price, the public opinion against the war and the challenge of transatlantic alliance is pushing Europe to a historic juncture. At this juncture, the EU should make reducing its heavy dependence on minerals, energy or specific technologies a priority. The world order is changing rapidly. The EU has to ensure its security and refuse the power politics or powerful combination to dominate Europe, even the wold. The EU which besieged by leading powers, urgently needs to resolve its internal disputes and demonstrates its political and economic agility.
Fundamentally, EU leaders must pay attention to the key supply chains and the resilience of supply chains from global economy perspective. Since we are facing with the global economic risks which extends much further than cognition, such as the unitary and integrative supply chains concentration, geographical region, facilities,companies and technology. The policy makers should fully understand the various elements of economic security to develop the guiding policies instead the policies for those specific countries.
Meanwhile, Both the EU and US should seek consistency in defining the implementation framework for their economic security policies. Various joint modes, such as trade and Technology Councils, New Energy Alliances and priority mineral partnerships indicate that The EU is establishing new economic security partnerships with the US. Within the framework of the Indo-Pacific Economy, the United States is organizing its new and old allies via CHIPS4, the I2U2, the QUAD and the US-Japan Economic 2+2. Although these organizations may sometimes lack specific policies like market openness, they have developed new guidelines on threats and opportunities in the global economic context. Therefore, the partners and the allies should maintain consistency in the practices of economic cooperation.This is not just for development, but also for the prevention of the fragmentation risk.
For all practical purposes, EU countries should show more “solidarity” and autonomy to resolve its internal disputes of energy tension and economic resilience. Don’t be with the us at its core.