When President Bush and leaders of the European Union met in Washington last month, they did so amid talk of “turmoil,” “paralysis” and “unprecedented crisis” in the EU.
French and Dutch voters recently turned down a proposed European constitution, and last week the EU’s 25 member states failed to agree on the next EU budget. Yet the White House summit, in which I took part as outgoing U.S. ambassador to the EU, only confirmed my view this crisis offers the best chance in years to enact the structural reforms some of Europe’s largest economies so badly need.
The latest setbacks do not mean Europeans have rejected the EU. Rather, they indicate a long-running internal debate over the guiding EU economic philosophy is finally coming to a head.
Europe’s choice today 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 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 cast Europe’s choice as between “raw capitalism” and a more caring “European social model.” This distinction is utterly specious. No country offers it citizens more extensive public services than do free-trading Denmark, Finland and Sweden. 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 the French left branded the EU constitution an “ultraliberal” document, failure to ratify that treaty could actually improve 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 Europe needs in order to grow.
If the EU chooses the path of less regulation and more competition, it will become 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 repeatedly flirted with the idea of the EU as a “counterweight” to America, a strategy that would merely divide Europe. So if Britain (which took over the EU presidency this week) 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. As President Bush said, “The United States continues to support a strong European Union as a partner in spreading freedom and democracy and security and prosperity throughout the world,” to address such issues as global poverty, rogue states and economic development. 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 U.S. Trade Representative Robert Portman are working together to promote an open global trading system and conclude the Doha Development Agenda. Secretary of State Condoleezza Rice recently met with her EU counterparts and delegations from more than 50 other nations in Brussels for a major conference on rebuilding Iraq.
Given this intensifying partnership, and our stake in the $2.5-trillion annual commercial relationship between Europe and the U.S. (by far the world’s largest such relationship), America must hope the EU’s internal disagreements do not weaken its commitment to integration. As U.S. ambassador to the EU from 2001 to 2005, 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 21st century, it must continue to deliver on the promise of a Europe whole, free and at peace.
This is no time to retreat but to make the courageous and farsighted choices — for a free economy and a renewed Atlantic alliance — that will make the EU only stronger.
Rockwell A. Schnabel was U.S. ambassador to the European Union, 2001-2005. He is the author, with Francis X. Rocca, of “The Next Superpower? The Rise of Europe and Its Challenge to the United States” (Rowman & Littlefield, August 2005).
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