Preparing for a disintegrating Europe: Prospects and challenges for international trade

19 Jul, 2021 - 00:07 0 Views
Preparing for a disintegrating Europe:  Prospects and challenges for international trade

The Chronicle

By Gift Nyongo
Could a resurgent and increasingly restive Russia and an ever eclipsing China be a cause of EU disintegration? Could the energy conundrum in the EU and the emergence of China as one of the leading lenders outside of traditional private lenders play a significant role in the polarisation of one of the most enduring multilateral institutions ever created? What would such disintegration mean for the global political economy especially international trade? All these questions and more are the subject of discussion in this piece which will argue that fissures occasioned by; the departure of the United Kingdom (UK) under Brexit; how the EU deals with its rabble-rouser neighbour in the east- Russia; the nascent economic and military might of China – all place the EU at the pedestal of a potentially divided future characterised by a dramatically changed European and global political and economic playbook that may have prospects and challenges for international trade.

For an outsider looking in, Europe, under the aegis of the European Union (EU), may be considered the archetype of multilateral integration. Social contract theorists such as Hobbes, Locke, Montesquieu, and Mozi and so on, suggested a system out of the state of nature- a way of life before societies came into existence- into political society characterised by government of people based on mutual contracts.

At continental level, the European project represents a diverse mix of economies and cultures under one roof. It has provided both prospects and challenges associated with Regional Economic Communities (RECs).The EU in many ways has provided the world with a template for conducting multilateral open market trade relations.

For example, one notes that the African Continental Free Trade Area (AfCFTA) is fashioned around the EU wherein trade amongst member states will be conducted along free market principles. Indeed a partnership does exist between the AU and the latter where technical assistance has been rendered (au.org. 2020).

Created from the ashes of the European Economic Community (EEC) – itself formed with the aim of ending frequent wars that had characterised the pre-WWII period and championed by leaders such as Winston Churchill and his contemporaries and the European Coal and Steel Community (ECSC) – it has survived on a shared sense of unity akin to what Churchill called “United States of Europe”.

Progression from economic to political unity would have seen Churchill’s dream of a USE morphing into another world superpower to rival or overtake the USA.

However, one notes that the first warning signs of disintegration may be traced to the UK’s insistence on not joining the monetary union –the Eurozone. Some commentators note that the monetary union would have helped to stabilise markets and cushion the region from volatilities associated with the American dollar as was the case during the Great Depression and the much more recent Wall Street crash of 2008 that had a contagion effect globally except China which emerged largely unscathed on account of its strong monetary and economic policies.

Thus monetary policy disunity may have also affected the strength of the Euro which some consider to have failed to reach its full worth as a result. Nonetheless the Euro remains one of the leading currencies for international trade.

Brexit may well have been the ultimate test for EU unity but the exit appears to have left the union pretty much intact. The pursuit of individual British interests may have rocked the boat but the EU seems to have taken this move in its stride.

It is still to be seen how the various protocols such as on free movement, employment across the EU member states and the treatment of immigrants will be handled between the UK and the EU. It is a given however, that by joining a voluntary organization like the EU, a state relinquishes a measure of its sovereignty to the collective and Britain, as said by Boris Johnson, felt constrained to pursue its own path.

Supporters of Brexit felt being in the EU deprived the country a chance to be the optimum that it could possibly be.

However, one notes that the process exposed the vulnerability of the EU to disintegration on account of confining states to a whipping framework where economic relations ought to follow laid down rules. It is therefore argued that the very nature of economic pacts may induce a feeling of being hamstrung by institutional inertia leading to situations similar to that the British found themselves in and if other member states were to feel the same way, this would signal the total disintegration of the EU.

However, such disintegration may provide opportunities for nations to strike out new mutually beneficial arrangements detached from bloc mentality as with the case of the current frosty relations between Zimbabwe and the EU.

In this regard, in the Zimbabwe/EU example, where individual member states manage to disentangle themselves from EU law, it may well be in such states’ best interests to deal with Zimbabwe- or any other state in a similar predicament as it were- without inhibition. The current situation has stifled trade and other relations between the EU and Zimbabwe where individual EU member states may have wanted normal relations but are hamstrung by rules set forth by the organization.

As much as EU member states may have not been party to the dispute between Zimbabwe and the UK, organisational solidarity meant that the rest of the member states had an obligation to join in the fray of sanctions. Consequently, one observes that it is this kind of herd mentality that is now causing problems for EU member, Hungary, as it exercises its veto right regarding decisions that require consensus in terms of EU law and practice.

Another area of possible friction relates to Russia which has emerged as a restless neighbour whose intentions can split Europe in a new and dangerous Cold War. How the EU decides to deal with Russian perceived provocative behaviour be it in Ukraine, Crimea and the Black Sea or the Arctic space may trigger disunity in the house. First, the EU may find disunity around how to meet its energy needs over half of which are covered by imports translating to a rate of 61% on the energy dependence scale (measured by the share of net imports i.e. imports – exports) (europa.eu, 2019). Russia boasts the largest reserves of oil and gas in Europe and many EU member states depend on it for supplies (ibid). According to the same website, in 2019 almost two thirds of additional EU crude oil imports came from other countries with Russia accounting for 27% of the total supplies; almost three quarters of the EU natural gas needs included 41% from Russia while over three quarters of solid fuel (mostly coal) had a 47% component coming from Russia.

Against this background the present paper underscores the argument proffered by Savelkoul (2021) that; one key area of divergence in the EU lies in the perception of energy security for individual member states. Energy being a key driver of economic activity will be a key consideration informing decisions as to where each respective state chooses to source its energy needs of which Russia emerges the naturally preferred choice for many EU member states. This may put such states within collision course with the rest of the EU over values such as democracy and the rule of law which the EU find missing in Russia.

Yet, multilateral theory stresses opposition to bilateral discriminatory arrangements according to Kahler (2013) while Keohane (2002) defines multilateralism as the practice of coordinating national policies in groups of three or more states.

Thus the Lilliputian strategy of small countries banding together to collectively bind a larger one may see those energy deficient smaller countries defying EU decisions in pursuit of addressing vulnerabilities presented by weak energy supplies.

Faced with these market altering challenges, the prospects for fissures along energy security fault lines therefore loom large and may trigger retaliatory actions from Russia. As contained in a study by UNCTAD (2019), trade wars especially by large economies ‘have significant repercussions on international trade’ adding that such tariffs ‘would do little to help domestic firms in their respective markets’ (unctad.org, 2019).

The same report estimates that as these wars proceed, prospects are that ‘a handful of countries will capture a slice of the giants’ exports’ while at the same time harming some states that are part of the global value chain especially the developing countries. It is therefore a future holding both advantages and disaster for some.

While the foregoing may pose risks to the unity of the EU, a more subtle threat may be lurking in the form of China. Some note that China has emerged as a divisive state actor for the EU on account of its economic might that has placed it amongst the leading lenders globally. European countries, some of whom are quite influential in the bloc, have been beneficiaries of Chinese money.

This may erode such countries’ locus standi to affirm criticism of perceived Chinese transgressions especially regarding issues of human rights violations and its forays into Africa. The Chinese have since indicated that they will not brook any criticism of its policies for example, regarding the South China Sea, Hong Kong (Hong Kong National Security Law), Macau and Taiwan (One China two systems policy) and not the least by beneficiary states of its funds. Speaking at the centenary commemoration of the Chinese Communist Party, Xi Jinping even stated that world powers better be warned against such attempts.

In this regard, the case of Hungary is quite incisive to the challenges that threaten EU cohesion. For example, dw.com (2021), reports that Hungary has used its veto in favour of China when the EU wanted to issue a statement over China’s handling of the Hong Kong crisis.

The same website notes that Hungary under Orban is increasingly aligning itself with Russia and China in a policy called “Eastern Opening”. Needless to say, the policy mirrors Robert Mugabe’s “Look East policy” which saw Zimbabwe abandoning the Commonwealth at the height of its tiff with the UK and subsequently the EU. In the case of Hungary therefore, such breaking ranks may lead to discord and torpedo EU unity as consensus-the whole mark of EU foreign policy making-may be threatened. The implications of a disintegrated EU would be far reaching as markets respond to the slightest tremors in ways that may be difficult to recover from while it may at the same time be a boon for bilateral trade relations.

In the final analysis, Russia and China are, as would probably happen with any other state actor, positioned in such aggressive dispositions as to defend their interests against a non-state actor whose dominance of an entire continent has subsisted for a long time. Thus a disintegrating Europe may bring about situations of unilateralism, trade wars and a world order characterised by more bilateral trade relations. RECs may have to be recalibrated to reflect this new world economic order. The exit of the UK from the EU typically gives pointers as to what to expect after disintegration.

The writer is a student studying for a Master of Science in International Trade and Diplomacy (MITD) with the University of Zimbabwe. He is contactable via email at [email protected]

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