Higher-Level Rationality Versus Lower-Level Irrationality (2021)

Intuitively, it appears somewhat surprising that states’ foreign policies are fairly rational, for why should we expect sub-state politics, bargaining and decision-procedures to translate into “rational” decisions and policies. Of course, one might take issues with the premise that decisions taken by, or policies pursued by, states are reasonably (that is, on average, in the long run, and so on) rational. Then it is perhaps still surprising that foreign policies are not much more “all over the place”, namely substantially more irrational than they are. Admittedly, this is all somewhat, or even more than somewhat, subjective. So let’s try to disentangle these issues – conceptually.

Rationality is a slippery, ambiguous concept. Rationality can be defined as a means-ends relationship. A decision is irrational if it seeks ends that are not achievable given available means. A decision is also irrational if it has verifiably suffered from cognitive to affective biases. A policy is irrational if it is maintained in spite of evidence strongly supporting the need for a change in policy and such a policy is available at an acceptable cost. Inevitably, evaluating individual decisions will often involve a certain degree of subjective judgment, even if one agrees on all the facts.

Rationality should not be evaluated in terms of the success or failure of a decision or policy. A decision or policy that ends in failure need not have been irrational. A policy that turns out to be successful may have been deeply irrational. Virtually all decisions rely on assumptions and presumptions, and decision-makers often suffer from misperception (which may or may not be due to systemic biases and therefore irrational). Neither should the question be whether things could have gone differently (they almost always could have), but whether a better decision could have been taken – not in hindsight, but in view of what was known (or should have been known or could have been known) at the time. Again, this leaves no doubt significant room for disagreement when it comes to evaluating the rationality of a decision.

For example, the Battle of Midway could have gone differently than it did had the Japanese navy had a different carrier doctrine, invested more in intelligence and reconnaissance, or had a Japanese patrol plane had not failed to spot US carriers due to cloud coverage, or had the task force been less confident that their attack would come as a complete surprise to the US. This raises an important question about an individual decision and the context in which a decision is taken. The individual decision may have been irrational, but the context within which irrational decisions was taken may itself have been due to “irrational” decisions earlier on. These decisions, in turn, may have been due to political or bureaucratic comprises. flaws in the decision-making process or cognitive biases. Changing any of these decisions may plausibly suggest that a successful outcome might have been achieved. But hindsight bias needs to be avoided. The question about “how far back” an irrational decision reaches is nonetheless an important one and deserves greater exploration.

Decisions are determined by personal, bureaucratic (organizational process) and political (governmental politics) interests, and they are affected by decision-making procedures. Graham Allison (1971) famously made this point famously in his study of the Cuban missile crisis. This may translate into irrational policies (however ascertained) due to the need for political or bureaucratic compromises or the failure to correct for cognitive and affective biases. It may also lead to important issues not being raised as well as important questions not being asked. Japan arguably lacked a grand strategy because foreign policy and military intervention were the consequences of bureaucratic compromises rather than a high-level, political-strategic decision-making process.

The reality is that many of a state’s decisions (and bureaucratic, non-decisions) do not have dramatic consequences, and the costs of irrational decisions are often limited, or such decisions can be reversed once they begin to reveal their “irrationality”. As Jon Maynard Keynes quipped: “When the facts change, I change my mind. What do you do, sir?”. At the highest decision-making level, this requires deciders to ignore the sunk cost effect. At the policy implementation level, bureaucracies (often, not always) need to be “learning organizations” in order to adjust (as opposed to simply reverse) policies. Battles may not be refought, but tactics can be adjusted. So can strategy, in principle. Put differently, often there is room for maneuver, adjustment and recovery. Not always. In the face of German military aggression in 1939/ 40. Britain managed to recover, while France could not. 

Allison’s organizational and governmental politics model may have been somewhat oversold (Krasner 1972). But both models provide heuristically valuable frameworks for analysis. And they no doubt help explain curious and important facts, such as why the Soviets did camouflage the construction of their missile bases in Cuba, or even why German and Japanese intelligence was sub-par compared to their respective operational skills. (Cultural and geo-strategic accounts may also help explain the latter.) But high-level decision can often (but not always) be adjusted or reversed, and (often, not always) the bureaucracies prove sufficiently adept at adjusting or reversing course. 

Admittedly, these are broad, largely conceptual statements, supported by (at best) anecdotal evidence …. This handful of paragraphs is less an argument than food for thought and a call to revisit aforementioned “intellectually neglected perspectives”. The intention is to revisit this question and the concomitant analytical framework in greater detail at some point.

Further Thoughts on Cinema and War (2021)

War has always featured in literature and film, starting with Homer’s Iliad and Shakespeare’s History Plays (or indeed Troilus and Cressida) to the early days of cinema. Just think of The Birth of a Nation (1915), Napoléon (1927) and All Quiet on the Western Front (1930) to recent documentaries, including Ken Burn’s The Vietnam War (2017) or Sebastian Junger’s Restrepo (2010) and Korengal (2014).

There are war films, and there are war films. In this respect, the recent remake of Midway (1976) starring Henry Fonda and Charlton Heston called, unimaginatively, Midway (2019) also including an all-star cast is not particularly interesting, artistically or historically. The inside joke of depicting John Ford in a scene will be lost on most viewers. As a matter of fact, Ford’s footage of the battle (Battle of Midway) is in many ways more artistically valuable than the 1976 and 2019 cinematic renderings of the same event – even though it consists merely of original footage. For better or worse, many of the movies shot during World War II – whether staged or based on original footage, whether propagandistic or humanistic – raise many more interesting questions about reality and fiction, propaganda and documentary filmmaking etc. It is worth checking out Five Came Back (2017).

Hollywood war movies more often than not continue to bet on clichés. Midway is also full of tired clichés. As in so many Hollywood movies, Japanese characters are largely depicted as caricatures. (Only Yamamoto, the “good Japanese” who, at least initially, had opposed war with the United States, is partly exempt.) The Americans (and the Americans played by British actors .... why? To tap the British market?) are depicted as individuals, often heroic and valorous and always individualistic, while the Japanese characters are largely “ciphers”. In this respect, Midway 2.0. does not represent any improvement on Tora! Tora! Tora! (1970), shot half a century ago. Midway 2.0. even fails to resist unnecessary, but marketable human-interest stories, doing only slightly better on this account than the über-hollywoodized Pearl Harbor (2001). Midway 2.0. stands in a long line of big-budget, all-star cast productions, capturing pivotal moments of World War II, such as A Bridge Too Far (1977) or The Longest Day (1962). But it certainly does not improve on them artistically or in terms of historical accuracy, not even in terms of cinematography (in spite of all the extra technology available today).

Such are the limitations of the movie/ entertainment complex. Historically accurate and detailed renderings of key historical events such as Downfall (2004) or, at a lower level of command, Das Boot (1981) just do not sell as well. (It is worth watching Downfall and Darkest Hour (2017) side-by-side.) The fact that a surprisingly large number of the better war movies are German or French may be explained by the fact that movies in these countries need to be produced on smaller budgets and therefore can afford to be less entertainment- and action-movie-oriented. This may be beginning to change somewhat following the commercially oriented German production Generation War (2013), and who knows what Netflix and German entertainment companies will do next. Small budgets may be conducive to greater artistic quality. The nature and type of funding often affects the nature and quality of war movies, including differences in historical accuracy vs. entertainment vs. semi- or full-on propaganda. Just compare German Stalingrad (1993), American Stalingrad (aka Enemy at the Gates (2001)) and Russian Stalingrad (2013) as well Eisenstein’s wartime epics – though Eisenstein also proves that state-backed propaganda and artistic value are not mutually exclusive, while, perhaps, artistic value and entertainment-oriented productions are. Check out Alexander Nevsky (1938) or Ivan the Terrible I and II. 

Journey’s End (2018) is an example of a compelling and plausible, artistically valuable, haunting low-budget war movie. It depicts a company of British soldiers during World War I bracing themselves for the last German offensive in 1918, and it is told them from the same vantage point as Dunkirk (2017) or Lebanon (2009) – that of the infantry (or tank) man facing a largely faceless enemy. It is also a comment on the senselessness of military bureaucracies, reminiscent of older movies such as Paths of Glory (1957). Relatedly, They Shall Not Grow Old (2018) is another recent thought-provoking, haunting film about World War I making the events more emotionally immediate due to the transformation of the original black and white documentary footage into colour. 

War often forces humans to confront the extremes of human experience, including absurdity, courage, sometimes heroism, fear, terror, but also humanity and camaraderie, and almost always seeming senselessness and extreme violence. Some films capture aspects of the breadth and depth of such experiences, while others barely do so, often sacrificing artistic value in the pursuit of monetizable entertainment.

US Isolationism and German Nuclear Deterrence (2021)

Ø In the event of the United States retreating into isolationism, Germany would be deprived of the US’s implicit nuclear guarantee. All other things equal, this would weaken Germany’s security and force Berlin to make difficult decisions with respect to its security and nuclear policy.

Ø In such a scenario, Germany has three basic options: (1) Forego a nuclear deterrent altogether; (2) enter into some sort of renewed and credible nuclear sharing arrangement with a third country (or group of countries); or (3) create a robust, independent national nuclear deterrent.

Ø All three options generate varying strategic and political costs and benefits. Combining a latent (potentially enhanced) nuclear capability with a credible nuclear sharing arrangement (with France) would help minimize costs, while largely preserving the strategic benefits of nuclear deterrence. 

What if the United States pulled out of NATO and Germany had to do without the US nuclear deterrent? Although this would (arguably) be a major unforced error on the part of the United States, such a scenario cannot be dismissed out of hand after the Trump administration – bluff or no bluff – threatened to leave NATO. In a recent paper[1], we explored three scenarios with respect to future US grand strategy, one of which outlined the possible consequences of a US turn towards isolationism. In such a scenario, the United States would end the forward deployment of its military forces in Europe (and East Asia), leave NATO and terminate its commitment to European security, including extended nuclear deterrence. However unlikely such a scenario may (or may not) appear[2], its implications are worth examining. A withdrawal of the US nuclear guarantee would force Germany to review both its conventional military posture and its stance towards nuclear deterrence.

Historical background

Nuclear deterrence was a crucial pillar of West German security during the Cold War. While Germany never acquired an independent nuclear deterrent, and multilateral nuclear deterrence proposal came to naught after the failure of the Multilateral Force (MLF) [3], it benefitted from US (and UK) extended nuclear deterrence. West German security hinged on a US commitment to respond to a conventional or nuclear attack on Germany with nuclear retaliation. This was arguably crucial in view of USSR and Warsaw Pact conventional superiority. While counterfactuals cannot be proved one way or the other, extended deterrence – it can be argued on logical grounds – contributed to the absence of armed conflict between NATO and the Warsaw Pact, and thus benefitted West German security enormously[4]. After all, West and East Germany would have been the main battleground in case of both a conventional and nuclear conflict. 

In the 1970s, the credibility of the nuclear guarantee was being undermined by the deployment of Soviet nuclear intermediate-range missiles. The NATO double-track decision, namely, the deployment of Pershing-II missiles, sought to shore up nuclear credibility by preserving credible deterrence at the sub-strategic level, while eliminating the risk of potential nuclear blackmail. All of this is to say that nuclear deterrence was a key element of West Germany’s security strategy and nuclear policy was always an issue that German decisionmakers had to wrestle with (e.g. Adenauer/ Strauss). Although the Cold War ended three decades ago and Germany is today surrounded by allies, Germany continues to benefit from US extended deterrence in the guise of the so-called nuclear sharing agreement that provides Germany with have access to nuclear weapons in case of an armed conflict. Through NATO, Germany also continues to benefit from at least an implicit US nuclear guarantee in the guise of collective security. Extended deterrence, including the nuclear sharing agreement with the United States in the context of NATO, would become obsolete in case of an American retreat into isolationism. After all, the UK nuclear deterrent is highly dependent on the US and therefore, arguably, of limited credibility[5].

Strategic Background, Rationale and Logic

The crucial question is (1) whether, strategically, Germany needs a nuclear deterrent and, in case the United States withdraws from NATO, (2) if such a deterrent can be made effective and credible and, if so, (3) at what strategic, political and economic cost. During the Cold War, Western nuclear deterrence initially sought to offset Warsaw Pact conventional superiority and, once the USSR acquired an increasingly potent nuclear arsenal, maintain mutually assured destruction (aka nuclear balance). In the 1980s, NATO strategy increasingly looked to nuclear weapons as deterrence as well as war-fighting instruments[6]. Today, Russian conventional forces represent less of a threat to German security than during the Cold War – in spite of recent Russian military modernization. The rationale for a German nuclear capability would therefore be somewhat less to deter a conventional attack on Western Europe, but rather – following the logic of the nuclear revolution – to deter any attack, whether conventional or unconventional, and thereby eliminate the security dilemma altogether[7]. Full disclosure: the so-called stability-instability paradox posits that mutually assured destruction, while preventing direct armed conflict between nuclear powers, raises the likelihood of minor, indirect, conventional armed conflict between them.

If and to what extent non-nuclear states face the possibility of nuclear coercion by nuclear states is a crucial question in this context. The “coercionist school” posits that nuclear blackmail works (or can work), as it increases both the likelihood of coercion on the part of the nuclear-armed state vis-à-vis a non-nuclear state and creates incentives for brinkmanship on the back of escalation dominance[8]. An opposing school of thought regards the use of nuclear weapons as a coercive instrument as tactically redundant, costly and, ultimately, as lacking in credibility given the necessarily limited issues at stake. Whichever side one comes down on in this debate, it is difficult to dispute that a non-nuclear state is at least potentially weaker and more vulnerable than a nuclear state, particularly if the nuclear state can exploit the other side’s conventional inferiority[9] - now or in future. While a nuclear power cannot be coerced militarily by another nuclear power, let alone by a non-nuclear power, a non-nuclear power may be at risk of coercion attempts. Either way, a credible nuclear deterrent definitely helps preempt the possibility of nuclear coercion by another nuclear state as well as exploitation of one’s conventional military inferiority by such a state. Strategically speaking, minimum, narrow deterrence[10] would suffice to eliminate the risk of nuclear and conventional military coercion by another nuclear state.

Of the four reasons to acquire military capabilities – deterrence, compellence, defense, swaggering – nuclear weapons certainly lend themselves to deterrence and swaggering[11]. The strategic rationale underpinning minimum deterrence is, again, less to coerce (compellence) another state or even to actually retaliate (defense) in response to a conventional or nuclear attack than to deter such an attack in the first place. Again, minimum deterrence helps limit strategic vulnerability that is at least a potential source of influence for an opposing, nuclear-armed state. Ultimately, the underlying strategic rationale for the acquisition of a nuclear deterrent is the elimination of the security dilemma between two states with robust nuclear deterrence – the stability-instability caveat notwithstanding. 

Costs and Benefits of Various Options

In light of these strategic considerations, Germany has three broad options, and each comes with different costs and benefits attached: (1) retain a latent nuclear capability, that is, retain the ability to produce and deploy on relatively short notice an effective nuclear deterrent; (2) replace the US guarantee with another guarantee and/ or renewed nuclear sharing with another country or group of countries; (3) deploy an independent national deterrent. 

All three options generate varying costs and benefits, risks and opportunities. Option 1 fails to address Germany’s actual or potential strategic vulnerability vis-a-vis nuclear powers and it fails to eliminate the security dilemma. Option 2 limits strategic vulnerability but, at a minimum, raises the issue of credibility. If in a bilateral or multilateral arrangement Germany does not control an independent nuclear deterrent and continues to depend on somebody else’s permission to use them, the credibility of the nuclear deterrence may be constrained (much obviously depends on the details). The country offering extended deterrence needs to have a robust and credible nuclear deterrent itself. Otherwise extended nuclear deterrence lacks credibility in the first place. Option 3 offers the greatest degree of credibility, provided a robust nuclear posture, including effective second-strike capability, can be put in place. It is also going to be the costliest option in international and domestic political terms as well as economic terms[12].

How these costs are assessed and weighted will in part be a function of the international security environment. Roughly speaking, the domestic and international political costs increase from option 1 through option 3, while the strategic benefits in terms of credible and effective nuclear deterrence increase. The potential international political costs depend on the reaction of other countries to a German nuclear capability, including second-round effects such as the spread of nuclear weapons[13]. Last but not least, deploying an independent national nuclear deterrent would obviously create the greatest challenges in operational, technical and domestic (aka widespread opposition, potentially undermining credibility) and international (aka violation of existing treaties committing Germany not to develop, produce or deploy nuclear weapons) political terms[14]. Decision-makers facing difficult choices in the event of a US turn towards isolationism need to weigh these costs and benefits carefully.

A sensible compromise might be to opt for option 2 (nuclear sharing, joint deterrence) given its limited domestic and international costs, limited technical and operational challenges and manageable international security environment. Essentially this would maintain the status quo. A nuclear sharing agreement with France would be slightly weaker than the present NATO/ US arrangement, but it should be sufficient to guarantee minimum deterrence. It would also avoid the violation of international treaties and would be more palatable for third countries, including France, Germany’s Eastern European partners and Russia – even the United States. Again, it would largely be an extension of the status quo.

Option 2 could be combined with option 1 (aka enhanced, latent capability) if policymakers are concerned about a substantial deterioration of the international security environment. In this case (aka increased risk of nuclear coercion and mounting conventional inferiority vis-à-vis a nuclear-armed power) as well as in case the credibility of extended deterrence diminishes for whatever reason, putting in place the conditions to produce and deploy a robust (!) and credible (1) nuclear deterrent on short notice would provide a strategic hedge. Naturally, technical (technology) and operational (training, posture) problems would need to be sorted out. A necessary second-strike capability would likely require the deployment of nuclear warheads on submarines geared towards counter-value strikes. Enhancing Germany’s latent nuclear capability would violate German commitments under the Non-Proliferation Treaty and the Two-Four Treaty, and hence generate an international and domestic political backlash.

Hedge nuclear (multilateral) sharing with independent option

The details of any future scenario where the US turns towards isolationism will matter. The specific relative strategic and political costs and benefits associated with the three options may therefore vary. Strategically, much will (and should) hinge on how vulnerable Germany would be to conventional and non-conventional security threats, following a US withdrawal, how credible and reliable nuclear sharing would be relative to the domestic and international political costs and operational challenges related to the creation of an independent national nuclear deterrent. An enhanced latent nuclear capability that can be operationally deployed on short notice, is both robust and credible, combined with a credible nuclear sharing agreement appear to be sufficient to guarantee Germany security for the time being. A substantial deterioration of the international security environment might change that assessment and associated political-strategic cost-benefit calculus. Whatever moral taboos attach to the making of nuclear policy in the eyes of the general public, German policymakers and planners cannot avoid thinking in greater detail about what Germany is to do in case the US withdraws from NATO.

References:

[1] DGAP, The logic (and grammar) of US grand strategy (Berlin, 2021)

[2] For what it’s worth, some Washington think tanks are increasingly calling for an adjustment of the US global military presence and a restructuring of its security alliances (Cato, Quincy, to name just the most prominent ones).

[3] Nicolas Miller, Stopping the bomb: the sources and effectiveness of US nonproliferation policy (Ithaca, 2018); Alexander Lanoszka, Atomic assurance: the alliance politics of nuclear proliferation (Ithaca, 2018); Mark Trachtenberg, The Cold War and after (Princeton, 2012); Gene Gerzhoy, Alliance coercion and nuclear restraint, International Security 39 (4), 2014

[4] Fred Kaplan, Wizards of Armageddon (Stanford, 1991)

[5] Politico, How Washington own the UK’s nukes, 2015

[6] See footnote 3

[7] Robert Jervis, The meaning of the nuclear revolution (Ithaca, 1989). For a contrarian view, see Keir Lieber, The myth of the nuclear revolution (Ithaca, 2020)

[8] Todd Sechser and Matthew Fuhrmann, Nuclear weapons and coercive diplomacy (Cambridge, 2017); for a critical view of empirical evidence supporting coercion thesis, see Francis Gavin, Nuclear weapons and American grand strategy (Washington DC, 2020)

[9] Matthew Kroenig, The logic of American nuclear strategy (Oxford, 2018)
[10] RAND, Understanding deterrence, Perspective (Santa Monica, 2018)
[11] Robert Art, To what ends military power, International Security (4), 1980
[12] Carnegie, Tracking the German nuclear debate, August 15, 2018 (last updated March 5, 2020)
[13] Scott Sagan, The spread of nuclear weapons (New York, 2003)
[14] “Strategies” include hedging, sprinting, sheltering pursuit, and hiding, see Vipin Narang, Strategies of nuclear proliferation, International Security 41 (3), 2016

The Logic (and Grammar) of US Grand Strategy (2021)

While the administration of US President Joe Biden is bringing back a more familiar and predictable approach to global affairs, the medium- and long-term outlook for US foreign policy remains much more uncertain. Any shift in US grand strategy over the next 15 years would have significant implications for transatlantic relations – particularly for Germany, which has deep security relations and high-value economic ties with the United States. In order to assess the potential implications of future policy shifts and the kinds of mitigation required from Germany, I have developed three broad scenarios of how US strategy might evolve in as early as the next five years that I present here: liberal internationalism, realism, and isolationism and protectionism.

This paper is different. Rather than presenting highly engineered, narrative possibilities, it presents three scenarios that are quite classic, being iterations of three familiar US strategic modes:

(For detailed analysis, please go to https://dgap.org/en/research/publications/logic-and-grammar-us-grand-strategy).

1. The liberal-internationalist scenario broadly represents continuity from what we know of the Biden administration thus far. It sees the United States remain committed to both collective security in Europe and – leaving aside US policy toward China – to multilateral, non-discriminatory, and reciprocal economic cooperation globally. This, it goes without saying, is the optimal scenario from a German point of view: collective security offers Germany security, while a stable, liberal international regime benefits German prosperity.
2. The realist scenario sees Sino-US competition spill into the economic sphere, putting Europe – and particularly, Germany – in the uncomfortable position of needing to choose sides. Multilateral economic cooperation is subordinated, at least partially, to security competition. Washington squeezes its allies to align themselves economically with the United States in return for protection. While Europe’s continued security dependence on the United States makes it difficult to resist this geo-economic pressure, China unleashes countermeasures as Germany considers aligning with US policies.
3. The isolationist and protectionist scenario sees the United States as responding to increasing competition from China, domestic resource constraints, and domestic opposition by revoking its international security commitments and withdrawing into the Western Hemisphere. It resorts to protectionist geo-economics, significantly undermining international economic stability and cooperation. Europe in general, and Germany in particular, incur significant costs from the US retreat from transatlantic security and international economic cooperation.

This report is also somewhat different because it is not primarily about the scenarios themselves. Instead, I aim to offer three eventualities that are clearly differentiated along the familiar lines of various types of US grand strategy. In the liberal-internationalist scenario, US strategy is geared toward multilateralism, rules and institutions, economic cooperation, and the pursuit of economic welfare. In the realist scenario, US strategy is more focused on bilateralism, competition and conflict, power (rather than power-restraining institutions), and the pursuit of national security (rather than economic welfare). The isolationist and protectionist scenario presents yet another type of US strategy – one that is unilateral and inward-looking, turns away from international economic cooperation, and disentangles itself from “extra-hemispheric” security commitments.

For the sake of further clarity, this paper focuses on US strategy in just two fields: security and the international economy. In the liberal-internationalist scenario, the United States remains strongly committed to the existing system of transatlantic collective security. It also maintains broadly cooperative policies within the framework of the international economic regime established on the basis of multilateralism, non-discrimination, and reciprocity after the Second World War. In the realism scenario, Europe continues to benefit from US nuclear deterrence but is forced to take on greater responsibility for conventional deterrence. The United States resorts to geo-economic policies in the context of greater security competition. In the isolationist scenario, the United States pulls out of NATO and largely abandons its other overseas security commitments; international economic cooperation largely collapses.

This comparatively narrow focus allows us to generate clear implications from each scenario – particularly for German policy-makers: Given its dependence on US security cooperation and high-value economic relationship with both the United States and China, Germany would be almost uniquely negatively affected by a shift in US strategy away from today’s liberal internationalism toward realism or isolationism. Although the realist scenario is characterized by continued security cooperation between the United States and Europe, it also sees increasing geo-economic pressure being exerted on Germany by both the US and China. In the isolationist and protectionist scenario, the international system would initially be characterized by competition and conflict, leading to the reemergence of economic blocs and spheres of influence over time.

Lastly, we also focus here on the mechanics of how we generated the three scenarios – thus, more on how the United States makes its strategy rather than the strategy itself. We define strategy-making as the domestic political mediation of international ends and available domestic means. Therefore, each of the scenarios presented in this paper are constructed on the basis of three fundamentals:

1. The international system,
2. The availability of resources, and
3. US domestic politics

We open up the black box of domestic politics and show which international shifts pull which domestic US levers and vice versa. As a result, we can better understand how the United States behaves under different conditions and why. This matters if German policy-makers are to preempt and influence future policy.

Germany needs Europe to think about ways to preemptively mitigate the potential adverse consequences in the security and economic sphere that arise in the two adverse US foreign policy scenarios. On the basis of my analysis, I have outlined potential risk mitigation strategies and policies. With the help of the concept of asymmetric interdependence, fundamental mitigation strategies are derived in view of the different scenarios that consist of:

1. Autonomy/autarky,
2. Symmetry/balancing, and
3. Diversification/hedging

Each strategy is characterized by different cost/benefit trade-offs.

A more detailed analysis of the three scenarios and related cost/benefit trade-offs will be provided in subsequent DGAP Policy Briefs. But what is already clear is that the friendly “continuity” scenario is the least likely – not least because it is the hardest for the EU to influence. The liberal-internationalist scenario is characterized by a benign security environment and international economic cooperation. Avoiding Sino-US great power competition is a necessary condition if this scenario is to materialize.

Transatlantische Beziehungen nach den Bundestagswahlen (2021)

Der zunehmende Konflikt zwischen den USA und China wird die transatlantischen Beziehungen in den nächsten Jahren vor große Herausforderungen stellen. Für Deutschland gilt es deshalb, bilaterale Streitigkeiten mit den USA beizulegen und eine gemeinsame Strategie gegenüber China zu entwickeln, ohne jedoch die eigenen, besonders wirtschaftlichen Interessen aus den Augen zu verlieren. Die neue Bundesregierung sollte gemeinsam mit der EU und den USA die Welthandelsorganisation (WTO) reformieren, internationale Standards im Technologiebereich setzen, kritische Lieferketten in kooperativer Manier sichern und eine Politik verfolgen, die auf die Schaffung eines sogenannten Level Playing Fields, sprich auf gleiche und faire Wettbewerbsbedingungen zielt.

US-Chinese competition and transatlantic relations

Deutschlands Sicherheit und Wohlstand basieren seit rund 70 Jahren auf dem Fundament enger deutsch-amerikanischer Beziehungen. Während der Amtszeit von US-Präsident Donald Trump fielen diese jedoch auf ein historisches Nachkriegstief. Die sogenannte America-First-Politik – bewusst am Isolationismus der dreißiger Jahre anknüpfend – hat die transatlantische Kooperation nicht nur geschwächt, sondern sie zeitweise sogar grundsätzlich infrage gestellt. Während sich das deutsch-amerikanische Verhältnis unter der Regierung von Joe Biden bisher stark verbessert hat, darf die neue Bundesregierung die traditionell engen bilateralen Beziehungen zumindest längerfristig nicht mehr als selbstverständlich ansehen. Kurz: Deutschland sollte sich nicht mehr blind auf die USA verlassen.

Denn die machtpolitischen Verschiebungen im internationalen System und der amerikanisch-chinesische Großmachtkonflikt weisen auf eine Verlagerung des Schwerpunktes amerikanischer Außenpolitik Richtung Asien hin (Pivot to Asia). Die USA werden sich mittel- und langfristig aufgrund zunehmender Ressourcenknappheit und eines Wettbewerbs mit China nicht im gleichen Maße wie bisher in Europa engagieren. Des Weiteren wird der Druck auf US-Verbündete, eine konflikt-orientiertere, geoökonomisch ausgerichtete amerikanische China-Politik zu unterstützen, wachsen. Die neue Bundesregierung muss sich auf einen verstärkten wirtschaftspolitischen Konflikt zwischen China und den USA vorbereiten, der unweigerlich deutsche Interessen tangieren wird. 

Nichtsdestotrotz ist Deutschland zurzeit gut positioniert, die Lösung gemeinsamer Herausforderungen (z.B. Klima, Gesundheit, Technologie) sowie die Beilegung bestehender Streitigkeiten und Probleme (z.B. bilateraler Handel, Lieferketten) voranzutreiben – zumindest soweit diese nicht einer härteren China-Politik der USA entgegenstehen. Zudem gibt es Bereiche, in denen amerikanische und deutsche Interessen weitgehend deckungsgleich sind (z.B. WTO-Reform, teilweise Investitions- und Technologiepolitik). Die neue Bundesregierung sollte jedoch nicht davon ausgehen, die amerikanische China-Politik in strategischer oder geoökonomischer Hinsicht beeinflussen zu können.

Auch die unsichere innenpolitische Entwicklung der USA stellt ein Risiko dar. Joe Bidens Sieg war knapp, Verschwörungstheorien rund um die Präsidentschaftswahl und die Kapitol-Stürmung kursieren weiterhin. Bereits bei den Zwischenwahlen 2022 könnten die Republikaner wieder die Mehrheit in beiden Kongresskammern erlangen, zumal sie in vielen Bundesstaaten alles daransetzen, die Wahlmöglichkeiten einzuschränken und Wahlreformen zu ihren Gunsten durchzusetzen. Sollte darüber hinaus nach der Wahl 2024 wieder ein Trumpist die (außen-) politischen Zügel in die Hand nehmen, könnte dies nicht nur den Fortbestand und die Stabilität amerikanischer Bündnisse gefährden, sondern auch zu einem irreparablen Bruch der deutsch-amerikanischen Beziehungen führen.

Die davon unabhängige, allgemein zunehmende sicherheitspolitische Hinwendung Amerikas Richtung Asien ist aus europäischer Sicht problematisch, insofern diese längerfristig auf Kosten der amerikanischen Militärpräsenz in und sicherheitspolitischer Verpflichtungen gegenüber Europa geht. Eine schwächere sicherheitspolitische US-Präsenz würde Deutschland wiederum zur (schnelleren) Vergrößerung militärischer Kapazitäten zwingen.

Zusätzlich trägt auch ein wiedererstarktes Russland, das die EU- und NATO-Osterweiterung als Verletzung seiner strategischen Interessen betrachtet, zu größerer sicherheitspolitischer Instabilität in Europa bei. Dieser vermehrte Sicherheitswettbewerb erhöht wiederum Deutschlands Abhängigkeit von den USA. Des Weiteren birgt der geopolitische und geoökonomische Konflikt zwischen den USA und China die Gefahr, die Offenheit und Stabilität des internationalen Wirtschaftssystems zu unterminieren beziehungsweise zu destabilisieren. Die vergleichsweise geringere Handelsabhängigkeit der USA und Chinas von Deutschland macht letzteres nicht nur wirtschaftlich, sondern auch politisch, verletzlich.

Deutschland muss vermeiden, zwischen die geo-ökonomischen Fronten zu geraten

Deutschland und seine europäischen Partner haben sich erhöhtem, aber derzeit noch moderatem diplomatischen Druck aus Washington, eine härtere amerikanische China-Politik zu unterstützen, bisher erfolgreich widersetzen können – auch wenn einzelne deutsche und europäische Firmen bereits von amerikanischen Sekundärsanktionen und Exportkontrollen betroffen sind. Sollten sich Deutschland oder deutsche Unternehmen im Rahmen eines geoökonomischen Konflikts zwischen den USA und China der amerikanischen Sanktionspolitik anschließen, steigt das Risiko von chinesischen Vergeltungsmaßnahmen (Unreliable Entity List, Blocking Statute etc.). China beabsichtigt bereits, seine internationale wirtschaftliche Abhängigkeit zu reduzieren (Dual Circulation), was seine Fähigkeit, wirtschaftliche Abhängigkeiten für politische Zwecke zu instrumentalisieren, erhöht. Nicht zuletzt deswegen muss die neue Bundesregierung das Risiko, zwischen die geoökonomischen und geotechnologischen Fronten zu geraten, ernst nehmen. 

Im Hinblick auf eine härtere geoökonomische Politik der USA gegenüber China, sollte die Bundesregierung versuchen, die US-Regierung dazu zu bewegen, gemeinsam mit Deutschland und anderen Verbündeten, eine Politik zu verfolgen, die auf die Schaffung gleicher Wettbewerbsbedingungen abzielt (v.a. was Reziprozität und Marktzugang, chinesische Subventionen und chinesische Industriepolitik, intellektuelles Eigentum und Technologietransfer betrifft). Soweit solch eine Politik nicht sicherheitspolitisch relevante Aspekte von Washingtons China-Strategie betrifft, besteht grundsätzlich die Möglichkeit, die USA dafür zu gewinnen. Selbst wenn diese Politik fehlschlagen sollte, kann der damit erzielte transatlantische Konsens als Grundlage für die Vertiefung der bilateralen Wirtschaftsbeziehungen dienen. Hingegen ist eine grundsätzliche Politisierung der Wirtschaftsbeziehungen oder gar eine wirtschaftliche Entkoppelung von China im Kontext eines sich verschärfenden USA-China Konflikts nicht im deutschen Interesse. 

In den letzten Jahren belasteten eine Reihe bilateraler Streitigkeiten das transatlantische und vor allem das deutsch-amerikanische Verhältnis. Streitigkeiten gab es im Hinblick auf Handel (Stahl- und Aluminiumzölle, Digitalsteuer, Airbus-Boeing-Subventionen, WTO), Energie (Nord Stream 2), Klimapolitik, Technologie (Regulierung, Wettbewerb, Besteuerung), US-Sanktionspolitik (Joint Comprehensive Plan of Action oder „Iran-Abkommen“) und Fragen der sicherheitspolitischen Verantwortung (NATO-Verteidigungsausgaben). Mit einem Übereinkommen hinsichtlich einer Digital- und weltweiten Unternehmensbesteuerung, dem Nord-Stream-2-Abkommen und der Suspendierung des Airbus-Boeing-Disputs konnten seit dem Amtsantritt Joe Bidens in einigen Bereichen Fortschritte erzielt oder zumindest ein vorübergehender „Waffenstillstand“ vereinbart werden (Stahlzölle). Die neue Bundesregierung sollte die Bereitschaft der Biden-Regierung, bilaterale Streitigkeiten zu lösen, nutzen, um an der wirtschaftlichen Front weitere Fortschritte zu erzielen. 

Des Weiteren sollten Anstrengungen hinsichtlich technologischer Kooperation und der Festlegung von technologischen Standards sowie der Sicherung von kritischen Lieferketten vorangetrieben werden. In diesen und anderen Bereichen gibt es schon grundsätzliche Übereinkommen, auf deren Basis die ressortübergreifende Zusammenarbeit seitens der USA, der EU und Deutschlands intensiviert werden kann. Diese sollten entsprechend genutzt werden, nicht nur im Hinblick auf einen regelmäßigen Austausch zu bestehenden internationalen und transnationalen Herausforderungen (Klimawandel, Technologie, Gesundheit etc.), sondern auch, um die Politik gegenüber China zu justieren, Differenzen aufzuzeigen und diese diplomatisch abzuarbeiten.

Verstärkte Kooperation und Stärkung der eigenen Kapazitäten

Im Kontext der Vereinbarungen der letzten G7-, NATO-, USA-EU- sowie deutsch-amerikanischen Treffen (Washington Declaration) sollte die neue Bundesregierung im wirtschaftlichen Bereich prioritär eine gemeinsame Position bezüglich einer WTO-Reform und der Schaffung von technologischen Standards finden. Ebenso sollte sie die technologische Kooperation und Sicherung von kritischen Lieferketten vorantreiben. Auch gilt es, die Kooperation in puncto Klimaschutz und Gesundheitspolitik zu stärken. Neue bi- und multilaterale Foren sollten zur Konsultation, Koordination und Kooperation genutzt werden.

Neben strategischem Dialog auf Regierungsebene (z.B. ein US-German Economic Dialogue) könnte ein neu zu schaffendes deutsch-amerikanisches Zukunftsforum (US-German Futures Forum) die Gelegenheit bieten, amerikanische und deutsche Fachleute aus Wissenschaft, Wirtschaft und Zivilgesellschaft zusammenzubringen, um gemeinsam an wichtigen Fragen rund um Technologie, Demokratie und globaler Kooperation zu arbeiten. 

Sicherheitspolitik: Schnellere Anhebung der Verteidigungsausgaben im Rahmen der NATO-Vereinbarung, um die eigenen nationalen Kapazitäten zu erhöhen. Die USA erwarten zunehmend, dass europäische NATO-Partner mittelfristig eine aktivere und längerfristige Rolle in der Sicherung des europäischen Nordens (Arktis), Ostens (Ukraine, Belarus, Russland, etc.) und Südens (Mittelmeer, Nahost, Afrika) spielen. Koalitionspartner sollten einen Rahmen schaffen, in dem Zusagen von Investitionen in verteidigungspolitische Kooperationen im Rahmen der EU (PESCO) im NATO-Kontext flankiert werden, nicht zuletzt um ausgewählte Interessen auch ohne Unterstützung der USA zu verteidigen (z.B. Krisen-Interventions-Kräfte). Der US-Abzug aus Afghanistan hat aufgrund fehlender Konsultation in Deutschland und bei anderen NATO-Partnern Bestürzung und Sorge ausgelöst. Dies könnte genutzt werden, um verteidigungspolitische Kooperation innerhalb der EU und mit anderen NATO-Partnern voranzutreiben.

Handels- und Investitionsbeziehungen: Die Bundesregierung sollte mit europäischen Partnern, intensiv auf eine WTO-Reform hinwirken (Ein transatlantisches Freihandels- oder Investitionsabkommen wäre wünschenswert, ist aber derzeit weder in den USA noch Europa innenpolitisch durchsetzbar). Gleichzeitig sollte sie die Arbeit zur Sicherung kritischer Lieferketten mit den USA vorantreiben. Ein Schritt, der auch mit den asiatischen Bündnispartnern der USA koordiniert werden könnte. Einer etwaigen Politisierung der US-Handelspolitik ist entschieden entgegenzutreten, sowie auch der Politik zum verstärkten Kauf eigener Produkte (Buy America) der Biden-Regierung. 

Technologie-Politik: Deutschland sollte die Kooperation mit den USA zu technologischen Standards vorantreiben und die transatlantische und besonders deutsch-amerikanische Technologieentwicklung intensivieren. Hier können der vor Kurzem geschaffene EU-US Trade and Technology Council und auch die Transatlantic Green Technology Alliance als Foren dienen. Deutschland wäre darüber hinaus gut beraten, eine strategisch ausgerichtete, nationale oder EU-weite Technologie- und Innovationspolitik, besonders im Bereich kritischer Technologien, auf den Weg zu bringen. Die Stärkung eigener technologischer Kapazitäten würde Deutschland für die USA zu einem attraktiveren Partner machen. 

US-Sanktionspolitik: Zudem müsste ein längerfristiger Plan zur Vollendung der Währungsunion erarbeitet werden, um sich langfristig weniger verletzlich gegenüber amerikanischen Sanktionen und möglichen chinesischen Vergeltungsmaßnahmen zu machen. Dies bedarf weitreichender Reformen (gemeinsame Einlagensicherung, Aufhebung des Staaten-Banken-Nexus, Stärkung der EWU-Krisenmanagementkapazitäten und weitere Finanz- und Kapitalmarktintegration). Solch weitreichende Reformen würden nicht nur die Wirtschafts- und Währungsunion widerstandsfähiger machen; sie würden auch helfen – zumindest auf lange Sicht –, Deutschland weniger verletzlich gegenüber einer härteren amerikanischen China-Politik zu machen. Hierfür wird es finanzpolitischer Kompromisse bedürfen. 

Insgesamt sollten sich die nächste Bundesregierung und neue Bundestagsabgeordneten bewusst sein, dass die Lösung transatlantischer und globaler Probleme sowie die verstärkte Hinwendung der USA nach Asien Deutschland unweigerlich zu größerer internationaler Verantwortung zwingen wird. Sie müssen dementsprechend die Notwendigkeit einer längerfristigen Stärkung deutscher beziehungsweise europäischer Kapazitäten und Bereitstellung finanzieller Mittel im Blick behalten. Die Erarbeitung einer umfassenden Strategie, die über das taktische Tagesgeschäft und der Lösung von, wenn auch wichtigen, Einzelproblemen hinausgeht, ist unabdinglich. Die Einrichtung eines Nationalen Sicherheitsrates sowie eines strategischen Planungsstabes auf Bundeskanzleramtsebene wären wünschenswert.

(Siehe auch https://dgap.org/de/forschung/publikationen/transatlantische-beziehungen)

'Foreign Policy for the Middle Class' and China Balancing Strategy (2021)

Biden has replaced Trump’s America First policy with the so-called Foreign Policy for the American People, originally conceptualized as Making US Foreign Policy Work Better for the Middle Class. The strategic rationale underpinning the new policy is the need to strengthen America domestically in order to enable it to compete with China internationally as well as the need to reconcile domestic political and economic imperatives with international goals. 

Foreign Policy for the Middle Class?!

In addition to issuing an Interim National Security Guidance, the administration has identified the major foreign policy challenges facing the United States as: defeating the pandemic; overcoming the economic crisis; renewing democracy; creating an effective and humane immigration system; revitalizing alliances, confronting the climate crisis; maintaining technological leadership; and confronting China (“biggest geopolitical test of the 21st century). Note that the first four issues are largely or purely of a domestic nature. This is consistent with new Biden policy, as it seeks to address domestic needs and lay the foundation for the domestic strengthening needed to compete with China over the longer term. 

The focus on strengthening America politically and economically is also reflected in the huge Covid-related fiscal stimulus administered earlier this year as well as the two proposed, equally huge “infrastructure” investment programs. The so-called “hard” infrastructure program has received limited but sufficient bipartisan support in the Senate, even though it had to be substantially slimmed down. The “soft infrastructure” spending program, largely focused on social and economic issues, is currently being pushed through Congress along partisan lines with the help of budget reconciliation. The Biden administration is making good on its promise to overcome the economic crisis and improve the medium-term economic outlook. At least, the “hard” infrastructure program should prove helpful. 

The Biden administration has been much slower to shift its trade policy. While it has made notable progress resolving long-standing transatlantic disputes (e.g. Airbus/ Boeing, digital tax, steel and aluminum tariffs), it has thus far made virtually no changes to the broader trade strategy, including its stance vis-à-vis WTO reform and trade relations with China. Trade Promotion Authority having expired in July, the administration does not seem eager to open a political flank domestically by reviving talks about a transatlantic free-trade agreement (TTIP 2.0) or rejoining its transpacific cousin (CPTPP). Although these are, or should be, crucial elements of a broader geo-economic strategy towards China, the administration is prioritizing domestic issues over a broader, politically sensitive geo-strategically-oriented trade policy – for the time being.

China remains most important driver of US strategy

Biden has also largely left unchanged its predecessor’s geo-economic, geo-financial and geo-tech measures aimed at China. This speaks to the new administration’s preoccupation with China. Meanwhile, the China policy enjoys wide-spread bipartisan support, backed – for what it’s worth – by public opinion. In spite of domestic hyper-polarization, the Senate even managed to pass the so-called Innovation and Competition Act worth a significant USD 250 bn on a bipartisan basis with relative ease. (Passing the hard infrastructure program was much more difficult.) China seems just about the only thing that enjoys significant bipartisan support in Washington these days. No doubt, the “China threat” can be mobilized by domestic political interests to generate support for a domestic reform agenda. If that is the case, this has not been very successful. Otherwise the debates over the investment programs should not have proven so acrimonious.)

China visibly remains front and center in US foreign policy. Although Secretary of State Anthony Blinken stated that “[o]ur relationship with China will be competitive when it should be, collaborative when it can be, and adversarial when it must be”, the adversarial aspects appear to have dominated thus far. Leaving aside bad atmospherics (Alaska meeting), the Biden administration has accused China of “coercion” and “intimidation”, while re-iterating that it views the Indo-Pacific region as “critically important to our nation, its security and prosperity”, (VP Harris). Washington is also trying to re-energize the so-called Quadrilateral Security Dialogue between the US, Japan, India and Australia, while strengthening bilateral security ties with both Japan and Korea (and even the Philippines) and reiterating its long-standing commitment to freedom of navigation as well as Taiwan.

The US decision to pull out of Afghanistan should also be read against the backdrop of Washington’s broader grand strategy. Leaving aside the potential risk of future terrorist threats, American interests in Afghanistan are limited. Besides, estimates have put the cost of Afghanistan war and post-war reconstruction at roughly one trillion dollar and an annual cost of 50-80 billion dollars. To put this into perspective, total costs amounted to 5% of 2020 US GDP and annual running costs were equivalent to 10% of defense outlays. By comparison, PACCOM seeks USD 27 bn in additional spending between 2022-27 as part of the Pacific Deterrence Initiative(or less than USD 5 bn annually). In strategic terms, ending the US Afghanistan presence is consistent with the broader strategy of focusing on China.

US China strategy informs transatlantic rapprochement

Last but certainly not least, the Biden administration is mending fences with its European allies. “America is back” and this has facilitated an improvement in transatlantic relations, particularly on selected economic issues (e.g. Nord Stream, Airbus-Boeing, taxation, digital tax). The desire to improve transatlantic relations, while no doubt desirable in its own right, also needs to be seen in light of intensifying US-China rivalry. Reviving traditional alliances and wooing European allies in the hope that they will line up behind a more hawkish US China policy was already evident at the various international summits during Biden’s visit to Europe, even if, admittedly, US pressure has remained relatively gentle and America’s European allies have successfully resisted it US advances so far. (France objected to extending NATO focus to Asia, and Germany objected to a broader geo-economic pressure strategy targeting China.) Nonetheless, intensifying US-China rivalry will lead to increased pressure on Europe to align itself with US policies. US concerns about the EU’s now effectively defunct bilateral investment treaty with China is just one example of transatlantic friction to come.

Barring unforeseen events, the US will continue to execute on its foreign policy strategy. China, in the eyes of the United States, is and will remain the “biggest geopolitical test of the 21st century” – and the century has only just begun – forcing the United States to play The Long Game. The US is set to accelerate its diplomatic, security and economic pivot to Asia in an attempt to balance (or contain, if you will) an ascendant and assertive China. Effectively, the US is currently pursuing – in the guise of the Foreign Policy for the American People – a strategy of what International Relations scholars call internal and external balancing. External balancing involves strengthening alliances, and internal balancing involves efforts aimed at enhancing a state’s economic and military power.

China is rare issue commanding bipartisan support in Washington

In other words, in order for its China strategy to be successful and credible, the US needs to mobilize greater resources domestically as well as externally. This is exactly what the Biden is trying to do with its semi-aptly named Foreign Policy for the American People – with the notable exception of domestically sensitive international trade policy (which remains under review). Although China is just about the only item on the State Department lists of challenges that enjoys bipartisan consensus, continued high levels of domestic political polarization may yet limit the ability to push forward with domestic strengthening in order to “compete without catastrophe”. If that is the case, the US will have little choice and push for greater external balancing, namely, push allies to align with, and mobilize greater resources in pursuit of, America’s China strategy.

If this logic is correct, American diplomatic pressure on Germany will increase. Any US China strategy will involve geo-economic policies. Such policies would see Germany being caught between the proverbial fronts in terms of trade, investment and technology. For example, US secondary sanctions and Chinese threats of countersanctions, including against foreign-owned companies in China, makes for a very unpalatable prospect. Germany’s far greater dependence on trade with the US and China (than vice versa) is another challenge. Last but not least, a more hawkish US geo-economic policy towards China will affect Germany, as Washington is quite unlikely to allow Berlin to play the role of a so-called third-party spoiler. Hence: the creation of a robust national and EU-level geo-economic toolkit to deter or deflect geo-economic pressure and/ or mitigate the consequences of US-Chinese geo-economic conflict needs to be combined with a forward-looking policy aimed at mitigating Germany’s existing economic and technological vulnerabilities.

What Is Germany To Do In View Of Impending US-Chinese Geo-Economic Conflict? (2021)

Germany caught in the crossfire of US-Chinese geo-economic conflict[1]

Germany is at risk of sustaining collateral economic damage in the face of intensifying US-Chinese competition and conflict. China’s ascendance and America’s desire to preserve the status quo have locked Beijing and Washington into a classic security dilemma. The United States sees China as a regional security threat and a nascent global systemic challenger[2]. Security competition is already well underway in the East and South China Sea[3]. So is geo-economic and geo-technological competition[4].

US-China competition and conflict will have profound consequences for Germany. Not only will competition limit the amount of resources Washington will be willing and able to commit to European security. It will also negatively affect Germany economically. For example, US protectionist measures targeting China may lead to Chinese exports inadvertently “flooding” European markets. It may also lead Washington to increase the pressure on Europe – and especially Germany as China’s most important European economic partner – to align with US geo-economic and geo-tech policies by resorting to secondary trade and financial sanctions. Non-alignment would negatively affect relations with the US. If Germany does align itself with US policies, however, it risks provoking Chinese economic retaliation in the form of trade and investment restrictions as well as regulatory discrimination. German companies, in particular, may suffer retaliation on the basis of a recently enacted Chinese blocking statute in case they choose to comply with US secondary sanctions targeting Chinese entities. This is a problem, not least given that the US and China are Germany’s two most important extra-EU economic partners.

Germany’s ability to affect the overall course of US-Chinese relations ranges from somewhere between very limited to non-existent. Its options in the face of US-Chinese competition are also somewhat circumscribed. Germany’s continued security dependence on the US limits the extent to which it can afford to align itself with China economically. Washington would hardly be willing to underwrite German security to the extent it does if Berlin aligned itself with Beijing economically or technologically. A position of relative neutrality or equidistance may look like a somewhat more viable option. But Washington will be reluctant to accept German economic neutrality and will therefore press Germany to support US China policy. After all, for US strategy to be successful in the geo-economic and geo-tech realm, Washington, to some extent, depends on German (and European) cooperation, lest Germany acts as a so-called third-party spoiler[5]. The more intense US-Chinese competition becomes, the greater the US pressure on Europe to align with hawkish US geo-economic policies towards China. 

Leveling the playing field, while avoiding decoupling

Berlin does share many of the Washington’s strategic goals, including the preservation of the territorial status quo in East Asia, freedom of navigation, and creation of a level playing field (aka fair international economic competition), namely reciprocal market access, an end to regulatory discrimination, a reduction of government subsidies, the elimination of technology transfer requirements etc.[6] Berlin does not necessarily agree with the means the United States deploys to pursue these objectives, including unilateral measures violating the very rules-based order Germany wants to see being upheld (e.g., Trump trade war). Berlin is of course also worried that confronting Beijing too forcefully will provoke Chinese economic retaliation targeting German economic interests. All other things equal, the broader the economic front on which the US confronts China, the greater the risk to German economic interests in case Berlin supports US policies.

A broader politicization of US-Chinese and, by extension, international economic relations is not in Germany’s interest. Geo-economic policies aimed at nudging China to make concessions in line with the principles and norms underpinning the international economic system, including reciprocity and non-discrimination, is. Geo-economic policies that risk fragmenting international economic relations and leading to broader economic and technological “decoupling” are not. The preservation of a rules-based multilateral international economic order (aka non-discriminatory access to both the US and Chinese economy) is a core German interest and an important factor underpinning German prosperity. Economic decoupling where Germany is forced to closely align itself with one side or the other is to be avoided, as, again, it would mean having to choose between its most and its second most important economic partner. 

Germany does have other reasons to provide conditional support to US policies – at least to the extent that they seek to level the playing field. Even a completely realpolitik oriented German policy would have cause to stay relatively close to the United States. Not only does Germany depend on the United States for its security, but the transatlantic partnership is also an important economic relationship, comprising not just trade and investment, but also, critically, offering Germany access to advanced technology. Moreover, longer-term the United States also looks “great power competitive” in spite of China’s impressive ascent. The US arguably stands a good chance of maintaining its geo-strategic and geo-economic position in Asia, and globally. China suffers from important structural weaknesses, including adverse demographics, middle-income trap (aka a growth model in need of reform), dependence on critical foreign technology and an uncertain longer-term domestic political outlook. 

While the US is faced with many similar challenges, it has one major, but critical advantage: allies. Washington has formal (or informal) alliances with virtually all the major powers in the world. Beijing has virtually none. China’s geographic and geostrategic position also puts it as a disadvantage relative to the US (island chains vs open oceans). And short of armed conflict, a major geopolitical realignment in Asia will remain unlikely. The US acts as an offshore balancer in the region, while China is embroiled in a significant number of territorial (and maritime) disputes, often challenging the status quo. It is certainly true that countries in the region prefer not to have to choose between the US (security provider) and China (economic partner), but in the end security is bound to trump economics. And as long as the US is perceived to be committed to upholding the regional status quo (as opposed to challenging in), the present geopolitical structure and existing security alliances will remain little changed.

The US also has a track record of relatively liberal and benign leadership (or dominance, if you will), at least as far as allied middle powers are concerned. By comparison, the prospect of Chinese leadership (or dominance) creates greater uncertainty – not just for security competitors (like Japan, Korea or Australia) but also for economic partners (Germany). All of this is to say that Germany has good reasons to support the US as well as US policies to the extent that they help preserve the territorial status quo, an open international economic order, and a level playing field, including technological standards etc. To the extent, however, that US policies risk leading to general economic decoupling – sectors relevant to national security and emerging technology excepted – this is not in Germany’s interest. The challenge for German decision-makers is therefore how best to support US policies aimed at preserving the status quo and leveling the playing field without inviting Chinese retaliation, while not incurring Washington’s ill will if Germany fails to support US geo-economic policies that risk leading to economic decoupling and economic destabilization. 

Offer Washington conditional support ….

What is Berlin to do in the face of mounting US geo-economic pressure and possible Chinese retaliation? Germany should consider pursuing a multi-track approach consisting of (1) offering Washington limited and conditional support in pursuit of narrowly defined objectives, primarily the establishment of a level playing field vis-à-vis China, while (2) minimizing critical economic vulnerabilities with respect to both the US and China – wherever necessary and/or effective from a risk-reward point of view. 

The cooperative piece should, first of all, focus on resolving important outstanding bilateral US-EU disputes (trade, tariffs taxation, technology, data) and on deepening transatlantic economic cooperation. Major trade and investment deals will be out of reach given domestic political obstacles on either side of the Atlantic. But more specific, issue-oriented cooperation is possible, including politically less onerous regulatory coordination, technological cooperation and standard-setting (e.g. EU-US Trade and Technology Council[7], trilateral group consisting the EU, Japan, and the United States[8]). Such cooperation and coordination should help further agreement on a joint position with respect to multilateral reforms aimed at leveling the playing field vis-a-vis China (especially WTO). This would help provide Germany diplomatic cover and it might improve the chances of China agreeing to at least some reform of the international economic regime.

In principle, Germany and the US should be able to agree on restrictions pertaining to emerging technologies and national security in light of their potential negative security externalities. National security may be a more sensitive issue to the United States given intensifying US-Chinese security competition. But Germany also has an interest in preserving technological leadership. A challenge might arise due to Germany’s preference for narrowly restricting technological decoupling and limiting national security exemptions, while the US may push for extensive restrictions, particularly if the American objective is less to level the playing fields than to retain its technological and economic lead over China as well as to use it as geo-economic leverage. Furthermore, the US is far less sensitive to Chinese geo-economic retaliation than Germany and will therefore be more willing to weaponize existing economic and technological interdependence in pursuit of broader political and strategic objectives. This is precisely what Germany wants to avoid and where Germany will be faced with increased US geo-economic pressure, including the threat of secondary US sanctions, effectively forcing German companies to comply with them or lose access to the US market or critical, US-controlled technologies. 

…. while accelerating efforts to reduce critical vulnerabilities vis-à-vis Washington and Beijing

This is precisely why Germany (and the EU) should accelerate and intensify efforts to reduce critical economic, financial, and technological vulnerabilities vis-à-vis both the US and China by accelerating efforts to gain greater autonomy, enhancing their ability to deter, and, if necessary, retaliate against geo-economic measures targeting its interests – or at least reduce the negative impact of US and Chinese geo-economic measures. Current efforts include so-called trade defense measures (trade), anti-coercion measures (secondary sanctions) and supply chain security (technology, critical commodities)[9]. These efforts need to be intensified and accelerated. 

As far as critical technology is concerned, the EU, for example, should consider creating an indigenous production and innovation capacity in areas deemed critical in order to lessen its dependence on the US and the concomitant threat of secondary sanctions. In light of accelerating US-Chinese strategic competition and intensifying state-supported technology competition (Made in China 2025, China Standards 2035, US Innovation and Competition Act), Germany and the EU should also invest more in innovation and critical and emerging technologies in order to mitigate future dependence and vulnerability with respect to potentially transformative technologies (AI, quantum computing etc.). Similarly, Germany and the EU should accelerate their analytical work on mitigating supply chain related risks, particular with respect to access to critical goods, including commodities and technologies. These critical dependencies create opportunities for US and Chinese geo-economic leverage. While Germany in particular is more vulnerable to US and Chinese trade measures, the EU as a whole is relatively well-positioned to deter geo-economic measures aimed at restricting trade and investment flows[10]. 

Reducing critical vulnerabilities will afford Germany greater strategic flexibility by making it less susceptible to geo-economic pressure and coercion, wherever it may come from. It will in fact also enhance the prospect for cooperation, for limited economic-technological vulnerability limits potential political exploitation, thereby making it less risky to cooperate in the first place. Therefore, the German government should conduct a broad National Economic Security Review of all potential critical economic, financial, and technological vulnerabilities vis-a-vis extra-EU economic partners and evaluate the risk-reward trade-off of potential mitigation policies. The review should also explore in what areas economic cooperation can be increased without providing third parties with potential geo-economic leverage. After all, US-Chinese competition is going to intensify, as is the geo-economic pressure Germany will face over the coming years and decades.

References:

[1] Geo-economics can be defined as the use of economic means to pursue geopolitical ends.

[2] Systemic in the sense of challenging the dominant position of the United States in the international system, and systemic in the sense of China of challenging the norms and rules underpinning the present system, including the provision of international public goods.

[3] Department of Defense, National Defense Strategy, 2017

[4] Congressional Research Service, US-China Relations, 2019

[5] Bryan Early, Sleeping with your friends’ enemies, International Studies Quarterly, 53(1), 2009

[6] Germany has tightened FDI legislation and lent it support to a variety of EU-level initiatives aimed at making the level playing field less uneven, including trade defense measures, anti-coercion instruments, EU FDI screening mechanism, and so on.

[7] European Commission, EU-US Trade and Technology Council, 2021

[8] European Commission, Trilateral meeting of the trade ministers, 2020

[9] European Commission, Study on EU’s list of critical raw materials, 2020; European Parliament, Extraterritorial sanctions on trade and investment and European responses, November 2020

[10] Markus Jaeger, The logic (and grammar) of US grand strategy, 2021