Bruegel, the European think tank directed by Jeromin Zettelmeyer (Madrid, 61 years old), has just published a report on the risks and scenarios of geopolitical movements at a global level. In that report, Zettelmeyer himself bets on 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. 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 US,” the economist said on a recent trip to Madrid to celebrate Bruegel’s 20th anniversary.
Ask. Is it Trump’s policy that pushes some of his traditional allies into the arms of Beijing?
Answer. The key event so far has been the meeting of the Shanghai Cooperation Organization (SCO) with the strong symbolic meaning of seeing the 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 on the non-aligned side, it continues to have border disputes with China and has not developed a manufacturing base that allows it to compete with Beijing. In the case of Africa and Latin America, there are countries that have important ties with China, through the New Silk Road, but others have been affected by it, such as Ecuador, Peru, Suriname… These are countries that can be pushed to reduce their dependence on the United States, given the experience of free trade agreements in the region, but which does not push them directly into the Chinese camp, whose main connection is a position against the West. Most countries are not there.
Q. Europe has security ties.
R. That’s why NATO will give us a clue. If the Alliance remains afloat, Europe will remain in the United States’ camp. At the same time, if the EU strengthens its autonomy in NATO, as Washington demands, this will give it greater independence in areas such as trade and there we will bring positions closer to countries that defend rules-based free trade, the basis of our model.
Q. Do you think the change in the United States is irreversible?
R. The United States has become an untrustworthy country. And to return to it, it is not enough for a new Democratic administration to reject the approach of the policies promoted by Trump, but a large majority of the Republican Party must also do so. Otherwise we will continue in the same situation we have been in since January 6, 2021.
Q. How does Chinese excess capacity influence the shape of this new order?
R. This is a complex story that has to do with subsidies, but also with smart industrial policy, which encouraged innovation and significantly reduced marginal costs. It also has a very positive component globally, for example in relation to cheap and clean technologies. Very cheap Chinese solar panels could be one of the few things that give us hope in the climate transition. It’s not all bad, that’s what I mean. At the same time, I don’t think this phenomenon can last, because the degree of Chinese competition and its production level are too great, there will be some kind of shakeup.
Q. What if this didn’t happen?
R. It has become clear that the equation does not imply that they produce goods and we produce services, because an authoritarian regime like China’s will exploit this dependence. There we will probably need tariffs, as already happens in sectors such as the automotive sector, and to impose conditions on the entry of Chinese foreign investments into the Union.
Q. Under these conditions, can Chinese overcapacity influence geopolitical blocs?
R. Yes, especially in countries where there is no industry, which open their market to low-cost Chinese products, which they themselves could produce, in exchange for China building infrastructure. The New Silk Road was going in that direction, but it didn’t work because the remuneration requested by Beijing to build the infrastructure was too high and the countries had problems with payments. If Beijing changes its policy and provides real fiscal support to those countries, then yes. But not in the military field.
Q. The SCO goes precisely in this direction and translates commercial alliances into military or political alliances.
R. This only works for countries that have neither the geographic location nor the ambition to develop a foreign or security policy that might clash with China, for example in Taiwan.
Q. What can the EU offer in this area?
R. Europe must fight for these countries because we need them, firstly, we need them and also China to decarbonise the global economy, and secondly because it is the way to reduce China’s very dependence on critical raw materials and other intermediate goods. Our resource is to be more generous with these countries in their industrialization and to import from these economies those energy-intensive goods that we do not have on the continent. Weaving our alliances.
