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Europe, US and China tomorrow: Will it be possible to avoid geopolitical and economic traps?

 

 

ABSTRACT

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There are many pitfalls looming. Some concern China, the United States and Europe, while others are more targeted, notably on China or on the relationship between China and the United States. Some traps concern geopolitics (the Thucydides trap, the Kindleberger trap, the Herodotus trap, the Tacitus trap, the Chamberlain - Daladier trap and the cold war trap), while others deal with  purely economic issues (the middle-income trap, the inflation trap, the stagflation trap and the debt trap). All the traps are real, and some of them already materialised, at least partially: China cannot rule some functions of power yet, some old powers have clear ambitions (China, Turkey, Russia, Iran and Saudi Arabia notably), Xi Jinping statements are listened to with great perplexity / suspicion (as was also the case for D. Trump); and some cold war elements are very noticeable between the United States and China. Same conclusion about the economic traps: debt worries have resurfaced, stagflation looms, and inflation is on its way. As for China, there is no doubt that deglobalisation threatens Chinese growth significantly.
Specific events or choices are likely to alter or accelerate some of these traps: the American diplomatic orientation following the presidential elections, the content and magnitude of de-globalisation, the impact of Covid-19 on geopolitics, economic choices (relocation of companies, search for greater independence and sovereignty...), the desire for power in the digital domain (especially artificial intelligence and big data)...
The newly elected J. Biden at the US presidency will have to cope with the potential traps. If there is a broad consensus in the United States, across political lines, it is the need for firmness towards China, which is effectively seen as a rival, failing to respect democratic rules or human rights, or fair trade. What will change with Biden about China is only the style and the attitude; in other words, the form, and not the substance. On the other hand, Europe and the US should be on the way to a new partnership. J. Biden has always been a staunch transatlantist, and it seems unthinkable that he would not make major changes in US policy towards Europe. Broadly speaking, the US may create with Europe a new alliance based on partnership and not on leadership. Negotiations, no more ultimatums or verbal threats. A big change, assuredly.

 

ITHURBIDE Philippe , Senior Economic Advisor

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