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Italy, the US and Europe: facing inevitable change in a smart way

    • Washington,DC
    • 8 July 2019

          In a global framework filled with uncertainty and marked by several true systemic changes, the still structurally sound transatlantic relationship is undeniably feeling the effect of rising tensions. Both the United States and Europe are subject to strong socio-political forces that are challenging faith in institutions and even the Western model itself – even though clear alternatives have thus far been lacking, and traditional European parties managed to hold out against the anti-establishment and euro-skeptic movements in the recent parliamentary elections.

          As for the United States, the majority of pundits estimate prospects for a second Donald Trump term at more than 50% at this moment, not least because the ongoing internal Democratic Party primary debate is going in the direction that Trump seems to prefer, with ambitious financial promises and controversial social policy objectives. The overall positive economic trend goes in the President’s favor, despite the fact that the long growth phase under way is weak in historical terms, with low investments and benefits not always evenly distributed across social categories. Reasons for concern have to do with the sustainability of this type of growth, accelerated by the monetary support of the Federal Reserve (which is, nevertheless, the object of the administration’s criticism for its presumed excess in prudence), does not seem to be having a direct influence on prospects for the upcoming November 2020 elections. On the other hand, the possibility seems to have faded of a strong government commitment to an infrastructure program, which would call for close collaboration between the two major parties and the White House.

          Recent developments in the American energy sector remind us that the U.S. emergence as an energy power is confirmation that economic dynamism – driven, in turn, by technological innovations and private investments – is the key to influencing world balances. Largely irrelevant to factors of this sort are the administration’s style and President Trump’s personality. America’s substantial energy independence is part of the broader framework of Washington’s gradual foreign policy shift away from the Atlantic to the Indo-Pacific axis launched by the Obama administration and therefore destined to continue post-Trump. This naturally changes the relative importance of traditional alliances and of the multilateral system that we know, and that is centered largely on those very alliances.

          The evolution of relations with China will clearly be central to future global balances, and consensus on the need for direct containment of Beijing’s ambitions is largely bipartisan, even if the methods adopted by Trump do not enjoy equally broad support among Democrats and even many conservatives.

          Looking to Europe, the parliamentary vote of late June showed the traditional parties holding their own, but also revealed a highly heterogeneous situation with geographic fractures along the North-South and East-West axes. The marked intergovernmental dimension in the Union’s workings emerged strengthened, beginning with the methods for selecting the key figures of the new Commission and other community bodies.

          Although in some sectors (starting with trade), Europe is capable of global leadership, the clash between the U.S. and China threatens to limit the room for autonomous European action, given that Washington and Beijing are weakening the entire regulated global system on which the EU depends – being as a whole more dependent than the rest of the world compared with a few years ago and compared with the United States. The frequent use of trade restrictions and economic sanctions sets up a serious challenge to America’s allies, given the resulting rise in unpredictability and entwining of economic interests with political and security objectives.

          In any case, economic performance is a key ingredient in socio-political stability, and this poses a specific problem for the entire European construction since further steps toward integration call for better economic prospects – thus developing a sort of vicious circle in the current political phase marked by concern for a better distribution of income.

          Some themes of common interest emerging along both shores of the Atlantic, however, will be a focal point in the coming years, and could therefore redefine the Euro-American relationship itself – particularly Artificial Intelligence and Big Data, which are going to have economic and security implications, as well as social and even anthropological ones. These technological advances, ranging from defense to finance, and certainly involving data and the relations between governments and citizens, are going to require a major effort at regulation for which it will be necessary to set common standards for the protection of competition and fundamental rights. This is a vast field of action involving interests and values and, precisely for that reason, transatlantic cooperation must be strengthened and nurtured.

          Another decisive issue in the future of Euro-American relations is international trade tensions, which place the regulated management of multilateral trade at special risk, in addition to threatening current value chains with respect to the Chinese role in some key technologies (the extreme scenario of “decoupling”). One widespread criticism of the Trump administration’s strategy, particularly the trade tariffs offensive, focuses on the intersection of strictly commercial goals (with a delicate consensual definition of fair trade at least at bilateral level) and strategic balances (for which the direct involvement of Western allies would certainly be advisable). Moreover, Europeans still consider relations with China a major opportunity, to the point of obfuscating the risk of a profound interdependence even in more sensitive sectors, despite the Old Continent’s growing awareness of the dangers inherent to some of the tactics systematically employed by Chinese businesses.

          Keen attention went to the energy transition to sources with a lower environmental impact, which is already under way despite various obstacles and uncertainties, and that will have wide-ranging consequences on global growth and development models, as well as on geopolitical equilibria. The timeframe for full transition to a carbon-free economy depends on many variables, with a mix still in part to be specified; but the trail seems to have been blazed and the essential technologies are already available.

          Natural gas is going to play a crucial role in this transition; the United States’ gas exports to European countries could increase Europe’s diversification of sources; a process, moreover, already under way, thanks not least to the Southern Corridor and EastMed’s exploitation of offshore resources, although further investments are going to be needed in the coming years. Reducing the dependence on individual suppliers is pivotal to energy security and thus fundamental to shared transatlantic interests.

          The difference in price between American and Russian gas, with Russia having a competitive edge, will probably not lessen in the near future but to make this new influx more economical and sustainable both regulation and infrastructure investments are going to be necessary in a framework of transatlantic negotiations.

          The private sector is adapting to the need to reduce the energy footprint, despite some problems with adopting new technologies along all production chains and complex systemic changes especially regarding especially electrical grids. Consumer habits are going to have to undergo further adjustments, which will have an impact on the political consensus necessary for the government to (at least initially) underwrite the costs of the transition – a consensus that currently appears insufficient for the rapid implementation of large scale change.

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