European and global political economy: transformation efforts

Views: 10

European states and the global partners are facing profound challenges to which national governments alone are unable to adequately respond, e.g. energy and climate, biodiversity and transport, sustainability and circular economy, to name a few. However, in dramatically altered global governance, all sorts of cooperation are becoming ever more difficult. Most governments in the world are already heavily involved investing in green transition: they are, actually, fiercely competing in attracting public and private capital for clean technology.  

Europe in the “large world”
In 2023, the EU trade in goods balance was positive with a surplus of €38 billion; this marks a great contrast compared with 2022 when the EU reported a deficit of €436 billion due mainly to the increased value of energy imports resulting from high prices for energy.
Presently, international trade proceeds in successful tempo: recent Commission’s estimates in February 2024 have shown that trade balance in the euro area (20 EU states) was about €23.6 bn surplus in trade in goods with the rest of the world (compared to only €3.6 bn last year’s February). The United States was the largest destination for EU exports of goods in 2023, while China was the largest origin for EU imports of goods.

Source: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_trade_in_goods

During September 2021- February 2023 the EU has had a negative trade balance of up to minus €56.4 bn, the lowest in history; however, since May 2023 trade has been positive.
Source: https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/6-16042024-ap#fragment-15944082-grio-inline-nav-2

On average, EU-intra trade by 60 percent occurs within the EU member states: e.g. the highest share of intra-EU imports is in Luxembourg (90% of its total imports), while the highest share of intra-EU exports is in Czechia (82% of its total exports). On the other hand, the lowest share of intra-EU imports was recorded in Ireland (39% of its total imports), mainly because the country is the primary trade partners with the US and the UK. The Netherlands is the country which imports mostly from outside the EU, and exports mostly inside the EU, which is continuing to play the role of main entry hub for the EU goods. By contrast, Cyprus is the country exporting mainly outside the EU, while importing mainly from inside the EU, which is mainly due to its geographical location which facilitates trade with the Middle East.
Source: https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20240327-3

Some researchers put attention to the “worrying trend” of companies and investment leaving the EU-27 due to an “overly complex and bureaucratized regulatory framework”, which is at the same time a “source of fragmentation”.
Source: https://www.businesseurope.eu/publications/letta-report-significant-call-reboot-eu-single-market.

Energy trends
At the recent EU’s energy summit (mid-April 2024) the energy-mix shifts have been acknowledged as a strategic move: i.e. replacing steadily fossil fuels’ infrastructures to renewables. Hence, old vulnerabilities (like pipelines, oil tanker routes, etc.) will be replaced by new ones, such as, for example, submarine electricity cables and solar-panels’ structures.
The EU-27 energy ministers also discussed the opportunities for closer cooperation with NATO facilities on alternative and transforming energy infrastructure aimed at finding solutions to secure investments into new development “from external threats” and competitors.
As to renewables, the group of countries calling themselves “friends of renewables”, which is seen as a kind of anti-nuclear coalition, has postulated some evident advantages of the former compared to the latter.
Besides, the member states’ ministers will also sign the European Solar Charter, as a EU-wide promise to local solar manufacturers that the EU still cares about keeping them alive.

The EU-wide economic motor: clear problems
German industry is already heavily invested the US, which is by far the country’s largest export market: e.g. German export to the US was about €158 billion in 2023, compared to €97 billion to China. On paper, China (Germany’s biggest trading partner when combining exports and imports) would appear to be the market with more growth potential. A major break with China would shrink the German economy by about 5  percent.
China no longer needs the machinery and other highly engineered capital goods that drove German export growth to the country in recent decades. That’s not just due to weaker demand; Chinese companies have largely caught up with their German competitors, making the country less dependent on imports. Interesting enough, at the turn of the century, German GDP was nearly twice that of China; less than 25 years later, China’s economy is now more than four times larger.
Even if China’s current economic woes prove temporary, the tensions between Washington and Beijing over Taiwan and global security writ large put Germany in a difficult position. Taken together, the U.S. and China account for nearly 20 percent of Germany’s trade, meaning the country can’t afford to lose either. That explains the balancing act Scholz has tried to play between the two.
As Politico noted, Germany’s reliance on the U.S. for its security means it may have no choice but to acquiesce to American pressure to turn away from China if push comes to shove. But so far, Scholz, like Angela Merkel before him, has succeeded in juggling the two relationships.

Source: https://www.politico.eu/article/why-germanys-scholz-is-bowing-to-the-chinese-dragon/?utm_source=email&utm_medium=alert&utm_campaign=Why%20Germany%27s%20Scholz%20is%20bowing%20to%20the%20Chinese%20dragon

German analysis
With its policy of reform and opening-up and increased international cooperation, China has followed a path that has led to strong economic growth, impressive poverty reduction and considerable prosperity for the country during at least 3-4 decades. This was accompanied by a limited opening-up of the country’s political sphere and society. Both China and Europe have benefited considerably from political, economic, scientific and societal exchange and from this opening-up. China is simultaneously a partner, competitor and systemic rival for Germany: “our strategy on China is firmly rooted in the EU common policy on China”.
As the analysis confirms, “most aspects of Germany’s relations with China have both a bilateral and a European dimension: the county is “pursuing its interests in accordance with the EU’s objectives”. It means, e.g. that closer coordination with the EU partners fosters a pan-European approach. Besides, it facilitates joint action by EU member states in multilateral forums.

On one side, Germany’s aim is to strengthen the resilience of its society, economy and scientific community while preserving the openness of the system. Deepening and strengthening the EU’s internal market ensure the country’s ability to compete, innovate – and ultimately- German’s prosperity and sovereignty.
On another side, unilateral dependence on critical preliminary-based products, cutting-edge technologies and individual markets can limit trade options and make countries vulnerable to political pressure. German government intends to promote the diversification of its economic relations in order to continue “cooperation” with China’s economic development while reducing German’s dependence in critical sectors.

Thus, comprehensive agreement on investment between the EU and China that was negotiated in 2020 is not possible at the present time, confirms the analysis. China’s economic strategy aims to make it less dependent on other countries, while making international production chains more dependent on China. While some liberalization steps have been taken, the conditions for access to the Chinese market in other important sectors have been tightened: it has been reflected in German-China bilateral trade.
Source: https://www.auswaertiges-amt.de/blob/2608580/49d50fecc479304c3da2e2079c55e106/china-strategie-en-data.pdf

In reality, Germany’s industry has not only reduced its engagement with China, it’s going for broke. German direct investment in China reached nearly €12 billion in 2023, a record. The Germans invested more in China between 2021 and 2023 than in the five-year period between 2015 and 2020, according to IW Köln, a leading economics institute.
More in: https://www.handelsblatt.com/politik/konjunktur/konjunktur-deutsche-direktinvestitionen-laut-iw-studie-in-china-auf-rekordniveau/100014964.html

Germany’s chancellor is heading to the Celestial Empire to grovel and kowtow in the hopes of providing some relief for the embattled German economy and rescuing his own political fortunes. Olaf Scholz is not only the most unpopular German chancellor since records began in the 1990s; he is also a wonderful gift for Communist Party Chairman Xi Jinping, who is facing serious economic malaise of his own and desperately wants to weaken Western resolve and alliances wherever he can.

European Parliament elections
At the same time, the elections for the European Parliament in June 2024 are taking place at a moment when European and world-wide democracy is confronted by unparalleled challenges.
European policymakers need to further strengthen the EU’s place-based Cohesion Policy and adhere to the ‘does no harm to cohesion’ principle when drafting new and revising existing legislation.
Following the investiture of the next European Parliament, the CEMR urges the new co-legislators to establish a “Public Service intergroup” focusing its work on improving local and regional public services.
Future EU co-legislators should encourage the next European Commission, set to take office in the autumn 2024, to nominate a dedicated Commissioner for Territorial Development with a clear mandate to drive the EU’s strategic and long-term Cohesion Policy.
Source: the Council of European Municipalities and Regions, CEMR opinion at: https://www.ccre.org/img/uploads/piecesjointe/filename/EU_Manifesto_CEMR_2023-0.pdf?msg_pos=2

  Our comment: Most governments in the world are already heavily striving to invest in green transition: they are, actually, fiercely competing in attracting public and private capital for clean technology. That competition has been sharpened in the world by the US Inflation Reduction Act and the EU’s Green Deal. The key principle would be to use public investment for unlocking further private investment.
And here are coming most vital “global financial players”, e.g. such as Black Rock, Vanguard and State Street, to name a few. The first two originated in 1988 and 1975; they are presently the most powerful asset-management companies with about $ 18 trillion (!). Together with Vanguard, all three are having over $ 20 trillion in wealth. At the same time, these “global financial gurus” are in the possession of about $11 trillion of the global total.
Just to compare: the European GDP is about $20 trillion and the US -about $30 trillion.
It is to be noted that the global “wealth” is around $ 454 trillion, data from 2022. However, about 10% of population in the world has acquired presently about 85 percent of the totally generated wealth – mostly in the western parts of the world, i.e. in North America and Europe. Thus, it is not so difficult to see where the main green transition financial facilities are are, as well as what influences and interests they are pursuing.

Reference to the Global Report: https://www.ubs.com/global/en/family-office-uhnw/reports/global-wealth-report-2023.html#executive

 

Leave a Reply

Your email address will not be published. Required fields are marked *

5 + thirteen =