We Must Not Sell Europe Short

Just a year ago, following the European Union’s (EU’s) historic enlargement into the former Soviet bloc, American pundits were entertaining the idea that Europe could be the wave of the future, poised to surpass the United States (US) economically while maintaining a kinder, gentler system of social protections, and thus serving as the rest of world’s model society.

Some commentators even foresaw a bigger, stronger, more self-confident EU asserting itself as a geopolitical “counterweight” to America.

Fashionable opinion today, to the extent that it notices Europe at all, is of an entirely different mind. Whether it sees the EU as an idealistic but outdated attempt to guarantee peace through supranational bureaucracy, or as a French-inspired plot by Old World Lilliputians to gang up on the New World colossus, the conclusion is the same: globalization and American unipolarity have made the EU irrelevant. And it’s not just Americans who talk this way. Much of the commentary in Europe itself, even in the EU capital of Brussels, has been equally harsh.

No doubt about it, 2005 was a bad year for the EU. French and Dutch voters turned down a constitutional treaty that European leaders had signed amid triumphal pomp the previous fall. Austria’s misgivings nearly scotched the long-awaited start of accession talks with Turkey. The national governments still haven’t settled on an EU budget for the next cycle, after months of bitter wrangling over how much money Britain should pitch in. And with the German center-right’s weak performance in recent elections, hopes have dimmed for urgently needed free-market reforms in Europe’s largest economy.

But as I learned in nearly four years as the US Ambassador to the EU, the current bearish attitudes toward European integration are as short-sighted as last year’s bullish-ness. The EU is here to stay, and the latest troubles could actually mean an opportunity for reform that will make the organization stronger and more ambitious than ever. This is one of the main arguments in my new book, which I wrote with Francis X. Rocca, The Next Superpower? The Rise of Europe and Its Challenge to the United States.

With a gross domestic product approaching $12 trillion (second only to that of the US), the world’s largest budget for development assistance to poor countries, a membership that includes two nuclear powers (Britain and France), and 25 votes at the United Nations, the EU can and does use its vast economic and geopolitical “soft power” to influence events and economies around the world.

US political and military leaders, and the largest American corporations, including Microsoft and General Electric, have learned at great cost that the EU is a force they cannot afford to ignore.

Yet the EU today stands at a crossroads, and the path it takes will determine whether or not it fulfills its potential to become the next superpower. Europe’s choice is between liberalism, which looks to a free market as the best allocator of resources in the global economy; and dirigisme, which places its trust in regulation and centralized state management. Both traditions have been prominent in the history of European integration, and the EU’s single market has served as a kind of laboratory for determining which system produces more prosperity.

France (the birthplace of dirigisme) and heavily regulated Germany and Italy now stand out among European nations for low growth and high unemployment. The British Isles, Scandinavia and the former Communist states are relatively dynamic and thriving.

Some commentators and politicians, among them former German Chancellor Gerhard Schröder, frame Europe’s choice as one between “raw capitalism” and a more caring “European social model.” But this alternative is utterly specious. No country offers it citizens more extensive public services than do free-trading Denmark, Finland and Sweden. And Tony Blair’s Britain has raised, not cut, social spending as it has grown richer.

The problem with dirigisme is not that it is too generous to ordinary citizens, but that its main beneficiaries are entrenched national interests, such as France’s heavily subsidized farmers, Italy’s protected banks, and the German lawyers and doctors who fiercely resist the European Commission’s proposal for a single European market in services.

Ironically, although some of the French left branded the EU constitution an “ultraliberal” document, failure to ratify that treaty may actually have improved the odds for Europe’s liberalization by halting the tendency toward supranational economic regulation from Brussels. Free competition in tax and economic policies among the 25 EU member states is the only effective way to promote the market-oriented reforms that Europe needs in order to grow.

If the EU chooses the path of less regulation and more competition, it will grow stronger in a geopolitical sense too. The European nations pursuing liberal economic policies also support a strong alliance with the United States whereas France and Germany have flirted repeatedly with the idea of the EU as a “counterweight” to America, a strategy that would merely divide Europe. So if Britain and other liberal regimes gain more influence over the EU, the Atlantic Alliance, and thus Europe itself, will grow more secure.

Washington wants the EU to succeed. Right now, the EU is helping respond to the humanitarian crisis in Darfur; keeping pressure on Iran not to develop nuclear weapons; and supporting the peaceful transformation of the Middle East. Despite occasional high-profile trade disputes such as Boeing-Airbus, EU Trade Commissioner Peter Mandelson and US Trade Representative Robert Portman are working together to promote an open global trading system and conclude the Doha Development Agenda.

Given this intense partnership, and our stake in the $2.5 trillion annual commercial relationship between Europe and the US (by far the largest such relationship in the world), America must hope that the EU’s internal disagreements do not weaken its commitment to integration. During my tenure as ambassador, I visited all 25 member states, as well as candidate countries Bulgaria and Turkey, where I personally saw how the “European idea” has taken hold and led to greater democracy, stability and prosperity across the Continent.

For the EU to fulfill its potential as a global power in the 21^st century, it must continue to deliver on the promise of a Europe whole, free and at peace. And Americans have every reason to hope that Europeans make the courageous and farsighted choices— for a free economy and a renewed Atlantic alliance—that will make the EU only stronger.