Friday, September 23, 2022

The Next Thirty Years - A German Perspective (2022)

The unipolar moment has passed. Another round of great power competition has begun. This isn’t good news for Germany. Germany benefitted greatly from the unipolar moment following the end of the Cold War. Under US leadership, NATO and the European Union expanded eastward. The expansion of multilateral cooperation in the guise of the IMF and the GATT/ WTO also created a truly global system of economic governance, enhancing German prosperity. Today US-Chinese rivalry threatens to undermine international stability and multilateral economic cooperation. The emergence of quasi-bipolar geostrategic competition will negatively affected Germany’s economic and security interests and complicate its foreign policy.

Great power competition is here to stay

US-Chinese great power competition will be impossible to avoid, if history is anything to go by. Having defeated repeated bids for regional hegemony in the 20th century, America will once more seek to prevent Asia from falling under Chinese hegemony. Washington will be forced to dedicate increasing resources to Asia, forcing Europe to take greater responsibility for its own defense. Europe and especially Germany will also face pressure both Washington and Beijing not to align itself (too closely) with their antagonist. As geopolitical competition spills over into the economic realm, the weaponization of interdependence, selective economic decoupling and the partial fragmentation of the international economic order will intensify. This will represent a particular challenge for internationally oriented countries, such as Germany. 

US-Chinese competition is inevitable. China will continue to rise and pursue assertive, revisionist policies. The United States will remain committed to defending the status quo in Asia and balance a rising China. China’s rapid ascent, compared to Russia’s relative stagnation, will force America to shift its strategic focus to the Indo-Pacific region. This has important repercussions for German and European security policies, forcing Europe to take greater responsibility for their security. The US-China relationship will range from competitive to conflictual across various important domains, such as security, the economy and technology. Even in areas where US and Chinese interests align, such as climate change and global health, the two will find it difficult to cooperate, as the broader competitive-conflictual relations will dominate.


On the assumption that neither China nor the United States will slide into a major domestic political or economic crisis, an increasingly bipolar structure will emerge, consisting of China, on the one hand, and the United States and its allies, on the other hand. Russia may move closer to China to form an anti-US partnership, if not necessarily a formal alliance. But China and China-US relations will be the dominant factors driving the distribution of power in, and the competitive dynamics of, the international system. Germany and Europe as well as the major Asian countries will remain broadly aligned with the United States. America’s increasing focus on Asia and concomitant demand for allied support will lead to occasional tensions in the transatlantic and German-US relationship, particularly regarding economic and financial policies. But ultimately the alliance will remain intact, not least due to Europe’s continued security dependence on the United States. 

The US-China relationship “will be competitive when it should be, collaborative when it can be, and adversarial when it must be”, according the Secretary of State Antony Blinken. Meanwhile, the EU sees China as “systemic rival” and an “economic competitor”. In other words, Germany and Europe share America’s concerns regarding China and support the preservation of the status quo in East Asia and the creation of a level playing field. But Europe and Germany will be less inclined to confront Beijing due their greater economic dependence on China. They are also less directly affected by China’s military rise. This will make Germany reluctant to align itself unreservedly and unconditionally with the United States. But Berlin will be willing to lend conditional support to US policies. As the United States will remain the ultimate guarantor of European security, Europe’s room for diplomatic maneuver is more limited than its economic size might suggest. US pressure on Europe to broadly support US geo-economic policies towards China will become an occasional source of transatlantic frictions. Europe will seek to strengthen its geo-economic defenses and reduce its economic-financial vulnerability vis-à-vis third parties so as to limit its susceptibility to US and Chinese economic pressure (aka “European Strategic Autonomy”).

Who will lead the world? The United States will lead, if not the world, then at least a broad group of countries consisting of traditional allies and new security partners. Its leadership will be strongly underpinned by the desire to balance China’s rise and the need to mobilize the necessary resources to do so. Washington will lead in terms of security and alliance policies. It will lead less forcefully in terms of economic and trade policies due to US domestic political opposition. The United States will succeed in maintaining alliance cohesion, provide credible strategic reassurance to its allies in the region, retain technological leadership, and generate sufficient internal (US) and external (allies) resources to support a credible and ultimately successful balancing strategy. 

Meanwhile, the China will be (already is) the dominant economy in Asia. And its economic weight and financial prowess will continue to grow, adding to its geopolitical influence and geo-economic power. Beijing will also continue to pursue a deliberate policy of reducing its geo-strategic and geo-economic vulnerabilities vis-à-vis the United States. China’s growing economic importance will put many US allies and partners in the region into an awkward position, given their close security ties with Washington. But in the end the US track record of relatively liberal leadership, its role as a status quo defending offshore balancer in Asia, and its continued, if somewhat diminished, attractiveness as a market and source of technology and security will lead virtually all allies to remain broadly aligned with Washington’s security policies, even if such a decision leads China to impose economic costs. In the end, security trumps economics, which will ultimately underpin US-led, liberal alliance focused on collective security and economic cooperation. US and Chinese geo-economic policies and coercion also raises the risk of inter-alliance economic fragmentation and economic conflict.

For China to lead, it would need to find (more) willing followers. Offering economic and financial incentives may allow Beijing to win support from some smaller countries. And rivalry with the United States may also push Russia closer to China. However, the major Asian and Indo-Pacific countries will stick by the United States. They are simply too fearful of China’s territorial revisionism and about being absorbed into the Chinese sphere of influence. The US-led alliance will remain largely intact. China will attempt to weaken America’s alliances but will ultimately fail to do so. Security concerns rather than economics will ultimately inform the stance taken by US allies. Similarly, Europe’s dependence on US security commitments, even if diminished, will also keep it broadly aligned with the United States.

German foreign policy towards the United States and China will not be unduly constrained by public opinion. German public opinion has turned on China in the past few years, while perceptions of the United States have improved following the election of Joe Biden. Public opinion is fickle and subject to change, of course, and it is far from clear to what extent if at all it influences German foreign policy. Nevertheless, the perception of China as an economic competitor, as supporting revisionism, particularly in the wake of Russia’s invasion of the Ukraine, and as an anti-liberal power has become dominant in Germany. This is unlikely to change. While public opinion also has misgivings about the United States, and these could again increase very quickly in the event of a MAGA president being elected, there is little doubt which way German public opinion will tilt in the future if Germany is forced to make choose between Washington and Beijing. 

Multipolarity or bipolarity?

Despite the EU’s economic importance, America and China are, or will be, the two most powerful countries in the international system. China’s rise challenges the United States as the defender of the status quo. China sees the US presence as threatening its interests and security and is keen to push the US out of Asia, as the United States pushed European powers out of the Western hemisphere during the 19th century. The US will seek to prevent China from emerging as the regional hegemon in Asia, the world’s most dynamic economic region. Ever since it emerged as an extra-American power, Washington has sought to prevent East Asia and Europe falling under the control of a single power, most recently during the Cold War. By virtue of their size and contradictory geo-political interests, this will lead to the emergence of a largely bipolar structure. Countries in the region will find it difficult not to align themselves with one side or the other, as US-Chinese competition intensifies. Again, Europe, as the third major global power, will largely align itself with the United States given its security dependence on Washington and its own concerns about China’s rise. A much weakened, even if nuclear armed Russia will tilt towards China. Virtually all current US allies and most of its fledgling security partners in Asia will also stay ‘close’ to Washington. 

The United States and China may not come to blows militarily and in this sense can be said to co-exist peacefully. But their relationship will be characterized by competition and conflict. As long as China continues to rise economically, Beijing will have little incentive to dial back its competitive, revisionist strategy, and the United States will have little choice but to counter China’s rise. A stable equilibrium is unlikely to emerge under such circumstances. A dynamic one will instead emerge. Unlike during the Cold War, the United States and China, and especially American allies and China, have much closer economic relations than the USSR and the US (and its allies) ever did. Unlike in the context of the superpower competition of the Cold War, economic interdependence is today a source of geopolitical vulnerability. Therefore, both China and the United States will seek to limit their vulnerabilities and leverage their geo-economic strength vis-à-vis one another. This is one reason China will attempt to create an alternative or parallel international economic governance regime. All of this will lead to qualitative, if not necessarily quantitative decoupling in an attempt to preserve military-strategic-technological advantage and pre-empt one’s rival’s ability to exploit one’s economic vulnerabilities.

Global Economic Governance

Global governance will weaken, as the US will be less committed to respecting multilateral rules-based economic cooperation, particularly vis-à-vis China. As suggested, China will seek to build an alternative governance regime in selected domains. As the US opts for an alliance-based approach to countering China, formal or informal governance regimes will persist and may even be strengthened (e.g. EU-US Trade and Technology Council, Indo-Pacific Economic Framework, QUAD). But Washington may also opportunistically take advantage of its allies’ economic and security dependence to nudge them towards supporting US policies. Meanwhile, US and allies’ demand for a level playing field will grow, while China will be reluctant to move to market-based economics in the face of geopolitical competition. This will also put pressure on multilateral economic governance and drive increased qualitative economic decoupling (and US allies may be forced to pick a side).

Germany in 2050

Germany will remain strongly committed to European integration as a strong European Union helps Germany limit its security and economic vulnerabilities (or strengthens its power, if you will). As the United States is forced to shift increasing resources to Asia to counter China, Europe and especially Germany will have no choice but to strengthen their security. Likely, Russia will remain the single most important actual or potential security threat. As long as the United States is seen as an effective guarantor of European security, many EU members, including Germany, will be reluctant to fully commit to a significantly more integrated, strategically autonomous European security community, which even under the most propitious circumstances will take decades to build. France will be keener to turn Europe into an independent military power than most other European countries. Continued doubts about the reliability of America’s commitment to Europe security might change countries’ attitudes.

Economically, Germany will push for a further deepening of the single market, a strengthening of the euro area and a strengthening of technological capabilities. By 2050, the EU will be economically more closely integrated in terms of monetary, banking and capital markets. A full-blown fiscal union will probably not emerge due to continued disagreements over risk sharing and sovereignty. But the EU will mobilize its latent economic power more forcefully, if imperfectly, to fend off geo-economic pressure from Washington and Beijing (e.g., ‘trade defense/ anti-coercion policy). In brief, Europe will be more (but imperfectly) integrated in terms of defense and even more so in terms of the economy. It will therefore remain susceptible to US and Chinese pressure.

Germany and the next 30 years 

Germany would prefer a future without great power competition and the concomitant risk of international economic fragmentation and destabilization. If great power competition cannot be avoided and a return to multilateral economic cooperation is impossible, a more realistic, second-best scenario from Berlin’s point of view is one where a stable balance-of-power leads to manageable security competition and manageable disruption of international economic cooperation. 

A combination of open, rules-based economic multilateralism and stable security environment would best reflect Germany’s material and ideational interests. Alternatively, Germany could live with a return to the American unipolarity of the nineties and noughties, which provided security and economic prosperity. But this would pre-suppose the absence of US-Chinese competition. Again, realistically an international system that that is underpinned by a stable balance-of-power might help limit geopolitical instability and economic fragmentation risks. From Berlin’s perspective, this would be preferable to a situation where US-Chinese bipolar competition is highly dynamic and potentially destabilizing, strategically and economically.

Berlin would like to see a strengthening of multilateral cooperation and collective security that includes Washington and Beijing. In addition to arms control and collective security, Germany would like to see the creation of a level economic playing field (“fair competition”) as well as see Washington to recommit to multilateral, rules-based international economic governance and reform. In such a world, countries could again focus on the pursuit of economic cooperation and allow for technological diffusion. Unfortunately, this is not going to happen.

Germany’s preferred future includes a stronger, more unified Europe capable to deterring military aggression and third-party geo-economic coercion. Such a future includes the creation of a sustainable security architecture in Europe that addresses both European Union and Russian security interests. More integrated markets and the deepening of the monetary and banking union would make not only make intra-European cooperation more efficient and resilient. It would also make Europe and Germany less vulnerable to political and geo-economic coercion. In the German view, ‘European strategic autonomy’ would help limit vulnerability and facilitate rules-based cooperation with the United States and China.

Europe and the next 30 years

Europe’s vision of its preferred future is closely tied to the concept of ‘European strategic autonomy’ defined as "the capacity to act autonomously when and where necessary and with partners wherever possible". Or more precisely, "the EU's ability to decide for itself and to have the necessary instruments, means, capacities and capabilities to act upon its decisions, in such a manner that it is able to safeguard its long-term interests, with others when possible but on its own when needed, without depending on the will and capabilities of third parties." Again, the EU would prefer a future based on collective security and rules-based economic cooperation. As such a future is unlikely, it is attempting to prepare for a future where US-Chinese rivalry and the weaponization of economic interdependence puts European interests at risk.

The way forward?

Task #1: Washington and Beijing should try to explore ways to engage in what has been called “managed strategic competition” and seek to create a stable balance of power. Both sides would need to come to believe that they are unlikely to prevail in case of unfettered competition, or they need to believe that neither side can win due to dynamic balancing. This may make them amenable to managed, more predictable and hence less destabilizing relationship.

Task #2: If Europe were to emerge as a co-equal, autonomous geopolitical player, it might be able to exercise a moderating influence on US-Chinese competition. After all, both Washington and Beijing would want to ensure that Europe does not tilt too far towards their geostrategic competitor. This might provide Europe with some, albeit likely limited influence. Alternatively, by throwing its support behind Washington, the EU may be able to get Beijing to reconsider the wisdom of pursuing revisionist policies.

Task #3: Even if it remains unable to influence the course of US-Chinese competition, a stronger and more autonomous Europe might hold out the prospect of cooperation among middle powers, such as Canada, Japan, Korea, and so on. This could help save multilateral, rules-based economic cooperation apart from US-Chinese rivalry. 

Task #4: It might be worth exploring whether reforming existing global governance regimes to account for China’s greater weight might help moderate Beijing’s desire to build an alternative economic governance regime (‘cooptation’). But this is only realistic if the United States can credibly commit to refrain from weaponizing economic interdependence. Also somewhere between unlikely and impossible.