international analysis and commentary

The State of the Unions: the US and the EU toward 2024

from the Aspen Italia's Transatlantic Conference

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The Transatlantic community is undergoing a period of significant transformation, in which successive shocks have brought a rapid change to the vision of expanding globalization that had taken hold in the 1990s and 2000s. The emergence of populist movements contesting free trade and the shift to a service and finance-oriented business model, the Covid-19 pandemic which forced massive state intervention into the economy and a re-evaluation of the resilience of Western societies, and the new fault lines drawn by the Russian invasion of Ukraine, all raise the question of whether the world can maintain fruitful political and economic ties in the coming decades, or whether we are heading towards a division between geopolitical blocs in the context of intensifying great power competition.

EU Commission’s President Ursula von der Leyen and US President Joe Biden

 

Crucial to this scenario are the relations between the United States and Europe. The solid transatlantic alliance in place since the end of World War II has entered a new phase, due to both the ambition to enhance the global role of the European Union and the need for unity on the Eastern front. While Vladimir Putin’s hopes of shattering that unity have proven to be ill-founded, determining the future of relations with Russia, and especially with China, the main systemic rival for the foreseeable future, requires developing an effective framework for the pursuit of shared objectives. Although the Biden administration seeks to maintain dialogue with Beijing, there is little indication that strategic tensions will cease to rise in coming years; and as the EU hopes to advance internal cohesion and its international stature, the voices calling for a re-assessment of Union-wide interests will only grow. The discussions and negotiations of today will define the nature of the transatlantic alliance going forward.

On the strategic front, there have been few fissures to date, with NATO united in its determination to drive back the Russian invasion. The question of when to start negotiations lurks, however, and will depend also on public debate on both sides of the Atlantic.

 

Read also: The Russo-Ukraine-Western Intelligence War

 

On the economic front is where the issues between Europe and the United States are most evident. Worries abound regarding the tariffs and subsidies that remain – and in some cases have even been expanded – from the years of the Trump administration. The “Washington Consensus” on trade and limited government economic intervention is no more, as a result of the three major disruptions mentioned above. And it is crucial to recognize that while institutional dialogue is essential to work out differences, the parameters of that dialogue have changed. Newly-central concepts such as resilience and de-risking must be conceived in a whole-of-society approach, seeking to respond to broad-based worries among the population on both sides of the ocean. In turn, these macro questions are intertwined with hot-button political and cultural issues that drive polarization and affect the possibility for governments to develop a coherent orientation regarding global trends.

The Aspen Transatlantic Dialogue will explore these issues and their unavoidable impact on the major decisions facing our governments and societies as we move into a new phase of transformation and competition, requiring both alignment and compromise between Europe and the United States.

 

Converging or diverging cycles across the Atlantic?

The Biden administration has succeeded in partially resolving the divide that had split the Democratic Party in the recent period: with a considerable dose of economic populism but an attempt to limit excessive rhetoric on cultural issues, the White House seeks to both address the underlying challenges facing the US economy and avoid deepening polarization. While worries are widespread regarding the president’s age, the appetite for a strong challenge to Biden seems limited, at least in the party structure. On the other side, however, the Republican leadership is struggling to marginalize former president Donald Trump, with alternative candidates falling back on older conservative talking points that risk failing to connect with the broader electorate. The result is a disconnect between Washington and the periphery that could undermine the progress made to re-orient the country towards the challenges of today’s world.

The European Union faces a similar challenge, although in a different configuration: while most “populist” movements have been either kept in check or assimilated as regards relations with Russia and threats to EU unity, the example of “illiberal democracies” in central and southern Europe once again demonstrates the need for new strategies to respond to public critiques regarding the cultural, economic and strategic orientation of the Union.

 

Political polarization in the US: understanding the key divides

The 2024 election campaign will tell us much about the interplay between the two principal divisions in US politics. Starting in 2015, the conservative-liberal split took a back seat to the revolt against elites epitomized by the campaigns of Donald Trump and Bernie Sanders. Many political figures still seek to exploit this divide, which shows up along various axes such as urban-rural, older and younger generations, and diverse ethnic groups. While anti-system movements sought to change the parameters of this division, building support across different cohorts, issues such as abortion, LGBTQ rights and political correctness have again become central to US politics, in part restoring the status quo ante populism.

 

The meaning of voters’ abstention: comparing trends

Europeans have traditionally voted in much greater numbers than Americans. Yet in recent years abstention has grown considerably in Europe, reflecting a lack of trust in the ability of government institutions to produce positive change for the population. At the same time, voter turnout in the US hit a high of almost 67% in 2020, even exceeding the figure for Italy’s general elections in 2022 (64%). On both sides of the Atlantic, however, the dilemma is similar: political activism and polarization can drive higher turnout in the short term, but a failure to effectively respond to voters’ concerns can lead to threats to stability and democratic institutions. Building trust between government and the population remains the central challenge.

 

The political economy of government subsidies: goals and tools

The need for greater resilience and de-risking is producing a return of state intervention and industrial policy, seen as unavoidable in Washington for both geopolitical purposes and in order to prevent the deepening of the domestic socio-economic divide. The reaction in Europe has been one of concern over threats to trade and production, in green economy sectors in particular. At the same time, the EU is also developing tools to incentivize investment and activity in key technological areas, in recognition of the changing global scenario. It is here that a new equilibrium can be key to allowing the transatlantic world to pursue its diverse economic interests and rise to the global challenges of the coming years.

 

The effects of great power competition

While European countries are generally maintaining a united front in regard to Russia, beneath the surface there are worries that the strategy of economic isolation will have negative consequences for the future, closing coveted markets. A debate is emerging on both sides of the Atlantic over a potential division into geoeconomic blocs in which the West could ultimately lose influence and opportunities. This contributes to hopes for an early negotiated end to the war and a less aggressive position on sanctions.

 

Read also: Requirements for a European defense

 

The broader challenge is how to manage relations with China going forward. The Biden administration recognizes the impossibility of a full decoupling, and is attempting to establish a constant dialogue as economic ties are remodulated, but not necessarily reduced. Europe must also navigate the effects on trade and investment of treating China as a systemic rival.

 

Ukraine and upcoming elections

The Ukraine issue could turn into a major factor in the US presidential race: all three of the highest-polling challengers to Joe Biden (Trump, DeSantis, and Kennedy) have expressed skepticism regarding continued support for Kiev, although to varying degrees. Gains on the ground in the coming months are seen as a political must by the White House, but limited success in the counter-offensive could put pressure on the administration for a more open debate on avoiding further involvement and working to at least freeze the conflict.

Calls for negotiations will undoubtedly be heard in the run-up to next year’s European elections as well. The presence of numerous parties still critical of EU and NATO policies guarantees that citizens in members states around the Union will be exposed to contrarian positions. Mainstream politicians will be forced to address this opposition in developing their policies in regard to the future of Ukraine.