Erica Fischer via Flickr
It’s the Single Market, Stupid
Peter S. Rashish
Vice President; Director, Geoeconomics Program
Peter S. Rashish, who counts over 30 years of experience counseling corporations, think tanks, foundations, and international organizations on transatlantic trade and economic strategy, is Vice President and Director of the Geoeconomics Program at AICGS. He also writes The Wider Atlantic blog.
Mr. Rashish has served as Vice President for Europe and Eurasia at the U.S. Chamber of Commerce, where he spearheaded the Chamber’s advocacy ahead of the launch of the Transatlantic Trade and Investment Partnership. Previously, Mr. Rashish was a Senior Advisor for Europe at McLarty Associates, Executive Vice President of the European Institute, and a staff member and consultant at the International Energy Agency, the World Bank, UN Trade and Development, the Atlantic Council, the Bertelsmann Foundation, and the German Marshall Fund.
Mr. Rashish has testified before the House Financial Services Subcommittee on International Monetary Policy and Trade and the House Foreign Affairs Subcommittee on Europe and Eurasia and has advised three U.S. presidential campaigns. He has been a featured speaker at the Munich Security Conference, the Aspen Ideas Festival, and the European Forum Alpbach and is a member of the Board of Directors of the Jean Monnet Institute in Paris and a Senior Advisor to the European Policy Centre in Brussels. His commentaries have been published in The New York Times, the Financial Times, The Wall Street Journal, Foreign Policy, and The National Interest, and he has appeared on PBS, CNBC, CNN, NPR, and the BBC.
He earned a BA from Harvard College and an MPhil in international relations from Oxford University. He speaks French, German, Italian, and Spanish.
James Carville, President Bill Clinton’s campaign strategist, famously quipped about the 1992 U.S. election that, “it’s the economy, stupid.” That kind of simple—but not simplistic—communication about political priorities will be essential if European governments are to engage voters and convince them to support policies that ensure the continent remains a global economic power.
At the moment, Germany and Europe are faced with unprecedented headwinds in their external environment, including Russia’s continued war in Ukraine, China’s manufacturing overcapacity and technology competition, and, more recently, an administration in Washington whose freshly minted National Security Strategy is pessimistic about (and even opposed to) Europe’s long-term trajectory based on its domestic political and societal alignment. The Trump administration’s assessment is overdrawn. Yet it is nonetheless the case that decisions made in Brussels and the twenty-seven national capitals over the next year to eighteen months will determine to a large degree whether the EU can continue to play a leading role on the global economic stage.
Perhaps ironically, given the pressures coming from the world’s three largest military powers, it is not so much changes to the EU’s foreign, security, or even international economic policies that are needed as steps to promote economic dynamism at home.
Whoever possesses domestic economic strength has the potential to exert geoeconomic influence—whether on global trading arrangements, artificial intelligence commercialization, or critical mineral supply chains—and be among the shapers of the next, post-idealist phase of the global economy.
Why? First of all, several EU member states, including Germany, are already significantly boosting their defense spending in a way that will help make the continent more militarily secure.
Second, last week the EU announced a notable strengthening of its Economic Security Strategy, including the launch of ReSourceEU, which will help respond to and deter China’s weaponization of its near monopoly on the production of rare earths and other critical raw materials.
But third, and most important, it is because the EU’s ability to be a consequential international actor will depend above all on its collective economic prowess. Whoever possesses domestic economic strength has the potential to exert geoeconomic influence—whether on global trading arrangements, artificial intelligence commercialization, or critical mineral supply chains—and be among the shapers of the next, post-idealist phase of the global economy. Although the current U.S. administration values its ability to act alone, the reality is it will need a stronger European Union to help it advance several of its objectives, especially as regards Chinese challenges to U.S. economic security.
The best way for the EU to ensure it will continue to assert geoeconomic agency (and to be taken seriously as a partner by a U.S. administration for whom power is the key metric) is through finally creating a single market that lives up to its name. According to a report by the International Monetary Fund, the lack of full commercial freedom within the EU is the equivalent of a tariff of 44 percent on goods and 110 percent on services trade. Removing internal barriers—above all on cross-border savings and investment but also in energy, defense production, transportation, and professional services—would finally turn the European Union into an economic whole as large as the sum of its parts. This would not be a zero-sum process: with a single market, U.S. firms would find it more profitable to trade with and invest in the EU than at present.
Although the importance of completing the single market has been convincingly argued in the Letta and Draghi reports from last year, the European Union is currently focused instead on deregulation, or what it calls “simplification.” It is true that some reduction of supply chain reporting obligations on companies will help their short-term competitiveness. But those steps cannot compare with the gains to the EU from becoming a unified commercial platform like the United States, shifting from being not only the world’s third-largest economy but also its third most powerful.
