Bruegel, the European think tank led by Jeromin Zettelmeyer, 61, recently published a report on the risks and scenarios of geopolitical movements on the global stage. In that report, Zettelmeyer himself predicts a world divided into three blocs, dominated by the rivalry between China and the United States.
“The most interesting thing is to analyze where Europe will be. It will never be in the China bloc, but it will not necessarily be in the US bloc either. If Washington continues to exercise coercive leadership, we will end up in the non-aligned camp, together with India and most developing countries. It depends on the United States,” the economist said during a recent trip to Madrid to celebrate Bruegel’s 20th anniversary.
Request. Are Trump’s policies pushing some of America’s traditional allies into Beijing’s arms?
Answer. The most notable development so far has been the Shanghai Cooperation Organization (SCO) meeting, with its strong symbolic value in seeing Indian leader Narendra Modi alongside Xi Jinping, Vladimir Putin and Kim Jong-un. This doesn’t establish an alliance, but it is concerning.
While India will remain in the non-aligned camp, it continues to have border disputes with China and has not developed a manufacturing base that would allow it to compete with Beijing. In the case of Africa and Latin America, some countries have significant ties with China through the Belt and Road Initiative, but others have been negatively impacted, such as Ecuador, Peru and Suriname. These countries may be forced to reduce their dependence on the United States, given the experience with free trade agreements in the region, but this does not push them directly into the camp of China, whose main unifying factor is opposition to the West. Most countries are not in this position.
Q. Europe has security ties.
TO. That’s why NATO will give us a clue. If the Alliance remains afloat, Europe will remain on the side of the United States. At the same time, if the EU strengthens its autonomy within NATO, as Washington demands, it will gain more independence in areas such as trade, and there we will find common ground with countries that defend free and rules-based trade, the foundation of our model.
Q. Do you think the change in the United States is irreversible?
TO. The United States has become an untrustworthy country. And to become reliable again, it is not enough for a new Democratic administration to simply reject the policies implemented by Trump; a large majority of the Republican Party must do so, too. Otherwise we will remain in the same situation we have been in since January 6, 2021.
Q. How does China’s overcapacity influence the formation of this new order?
TO. It’s a complex story involving subsidies, but also smart industrial policy that fostered innovation and significantly reduced marginal costs. Overall it also has a very positive component, for example regarding cheap and clean technologies. China’s very affordable solar panels may be one of the few things that give us hope for the climate transition. It’s not all bad, that’s what I’m saying. At the same time, I don’t think this phenomenon can last, because the level of Chinese competition and its production capacity are too great; there will be some sort of upheaval.
Q. What if this didn’t happen?
TO. It has become clear that the equation is not simply that they produce goods and we produce services, because an authoritarian regime like China will exploit that dependence. We will probably need tariffs, as is already happening in sectors such as the automotive industry, and to impose conditions on Chinese foreign investment entering the EU.
Q. Under these conditions, could China’s overcapacity influence geopolitical blocs?
TO. Yes, especially in countries without industry, which open their markets to very cheap Chinese products that they could produce themselves, in exchange for China building infrastructure. The Belt and Road Initiative was going in that direction, but it didn’t work because the tariffs requested by Beijing for building infrastructure were too high and countries had difficulty making the payments. If Beijing changes its policy and provides real fiscal support to those countries, then yes. But not in the military.
Q. The SCO goes precisely in this direction and transforms commercial alliances into military or political alliances.
TO. This only applies to countries that have neither the geographic location nor the ambition to develop a foreign or security policy that could clash with China, for example, over Taiwan.
Q. What can the EU offer in this context?
TO. Europe must fight for these countries because we need them: firstly, because we need them and also China to decarbonise the global economy, and secondly, because this is how we reduce dependence on China for critical raw materials and other intermediate goods. Our influence lies in being more generous towards these countries in their industrialization and in importing energy-intensive goods from these economies, which are lacking on our continent. We need to make our alliances.
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