See also: US-Chinese Competition and Transatlantic Relations
Germany is at risk of sustaining collateral damage in the face of intensifying US-Chinese competition and conflict. China’s ascendance and America’s desire to preserve the status quo lock Beijing and Washington into a classic security dilemma. The United States sees China as a potential regional hegemon in Asia and as an emerging global systemic challenger. China sees the United States as impeding its rise. Security competition is already well underway. So are geo-economic and geo-technological competition and conflict.
US-China relations are structurally geared toward deterioration. The Ukraine war notwithstanding, US-Chinese competition will limit the amount of resources Washington will be willing and able to commit to Europe. It will also negatively affect German economic interests, as it will lead Washington to increase the pressure on Germany – as China’s most important European economic partner – and Europe to align itself with US geo-economic and geo-tech policies. This may happen in the form of direct diplomatic pressure or indirectly through secondary trade and financial measures. If Germany aligns itself with US policies, however, it risks provoking Chinese economic retaliation in the form of trade and investment restrictions as well as regulatory discrimination. Sino-US economic decoupling represents a major problem, given that the United States and China are Germany’s two most important extra-EU economic partners.
Germany’s continued security dependence on the United States also limits the extent to which it can afford to align itself with China economically. The war in Ukraine has, if anything, reinforced this dependence. In the context of US-Chinese rivalry, Washington would hardly be willing to underwrite German security to the extent that it does if Berlin were to align itself more closely with Beijing and undermine US geo-economic policies. Meanwhile, a position of relative neutrality or equidistance is not an option, either. Washington is not going to accept German economic neutrality in the context of intensifying US-Chinese geopolitical and geo-economic competition. For US strategy to be successful in the geo-economic and geo-tech realm, Washington needs Berlin to support US policies, lest Germany threaten to undermine US policies as a so-called ‘third-party spoiler.’ The more intense US-Chinese competition, the greater the US pressure on Europe and especially Germany to align with hawkish US geo-economic policies toward China.
Germany has good reasons of its own to offer conditional support to US policies vis-à-vis China. The Ukraine war has made these reasons undoubtedly more compelling. First, Germany and the EU have come to see China as both a systemic rival and economic competitor. Like America, Germany is also committed to maintaining the territorial status quo, and it is keen to level the economic playing field vis-à-vis China and maintain technological leadership. Second, even a completely realpolitik-oriented German policy would be well-advised to stay relatively close to the United States – and not just in view of recent events. 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 offering Germany access to advanced technology. Finally, in the longer-term, the United States looks 'great power competitive’ despite China’s impressive ascent. It stands a fair chance of maintaining its geo-strategic and geo-economic position in Asia, and globally – not least thanks to its extensive alliance network.
Germany should therefore consider pursuing a multi-track approach. On the one hand, it should offer Washington conditional support to help establish an economic level playing field vis-à-vis China and preserve technological leadership as well as the territorial status quo in East Asia. On the other hand, Germany and Europe should minimize their critical economic vulnerabilities vis-à-vis third parties. This can best be done through diversification and, where necessary, increased self-sufficiency. Such a balanced policy would afford Berlin greater flexibility.
As part of the cooperative element of this strategy, Berlin should continue attempts to resolve important outstanding bilateral US-EU disputes and to deepen transatlantic economic cooperation. Major trade deals will be out of reach, given domestic political obstacles on both sides of the Atlantic. But more specific, issue-oriented cooperation is possible, including politically less onerous regulatory coordination, technological cooperation, and standard-setting (e.g., in the EU-US Trade and Technology Council or the Trilateral Group). Such cooperation and coordination should help both sides agree on a joint position seeking to level the playing field vis-a-vis China, enhance supply chain security and preserve US and European technological leadership. And it should help create a relationship of mutual dependence between the United States and the EU/ Germany, which should make it more difficult and costly to exploit the other side’s weaknesses.
Germany and the United States should be able to agree on a common position pertaining to emerging technologies and national security in view of their security implications and externalities in terms of economic competitiveness. National security is undoubtedly a more sensitive issue to the United States given intensifying US-Chinese security competition. But Germany also has an interest in preserving technological leadership. And Germany has a stake in the preservation of the status quo in Asia, and not just because of its interests in preserving and defending it in Europe.
Transatlantic disagreement might arise due to Germany’s preference for narrowly restricting technological decoupling and limiting national security exemptions, while Washington is bound to push for more extensive restrictions. The United States is far less sensitive to Chinese geo-economic retaliation than Germany and will therefore be more willing to weaponize the existing economic and technological interdependence in pursuit of broader political and strategic objectives. This is precisely what Germany should seek to avoid and where it will be faced with increased US geo-economic pressure.
Hence the defensive part of the strategy should focus on accelerating efforts to make more manageable critical economic, financial, and technological vulnerabilities vis-à-vis both the United States and China by accelerating efforts to gain greater autonomy – but not necessarily autarky – and enhance the capacity to deter geo-economic measures. These efforts need to be intensified and accelerated, not least in view of the 2024 presidential elections and the risk of a return to a unilateral, America First, foreign policy.
Over the long term, reducing vulnerability in the security realm will require better defense capabilities to limit the dependence on US military power. While the Ukraine war will accelerate European efforts to enhance capabilities, it has also made Germany more dependent on the United States as the ultimate security guarantor. Creating more autonomous capabilities for power projection and intervention and the protection of seaborne trade is highly desirable. Much enhanced military capabilities in Germany and Europe will also help preserve the conventional and nuclear military balance in Europe as well as a credible and effective nuclear deterrent.
Washington is currently pursuing a policy of internal and external balancing vis-à-vis Beijing (realist scenario). The Biden administration is wooing Germany by offering cooperation, and the Ukraine crisis has led the United States to reaffirm its commitment to the transatlantic partnership. But the 2024 elections may lead to renewed fissures and expose German and European vulnerabilities and dependencies. Independent of the outcome of the 2024 presidential elections and the Ukraine war, the structural deterioration of US-Chinese relations and the increasing US shift toward Asia will weigh on transatlantic relations. Germany and Europe should therefore accelerate and intensify their efforts to limit critical vulnerabilities. They need to prepare for a world where the United States will be less committed to Europe than it has been over the past three quarters of a century. Such an approach is perfectly compatible with a policy of conditional, smart transatlantic cooperation in view of common vulnerabilities and in pursuit of common interests.
Reducing critical vulnerabilities will afford Germany and Europe greater policy flexibility by making them less susceptible to geo-economic coercion, wherever it may come from. At the same time, Germany and Europe will gain a greater ability to deflect geo-political, geo-economic, geo-financial, and geo-technological pressure to pursue policies that are not in their interests. Fewer vulnerabilities and a more balanced relationship will also make it easier to maintain deep and extensive transatlantic cooperation. And should the United States ever move toward full-blown protectionism and isolationism, or China turn inward, or global cooperation break down completely as it did in the 1930s, Germany and the EU will already have done some of the preparatory work necessary to operate in a less cooperative, more conflictual, and more fragmented international system and economy.