The European Elections and the Future of Globalization

The upcoming European Parliament elections and subsequent appointment of the European Commission President will decide the leadership of the Old Continent for the next five years. Many European citizens do not seem to understand the importance of this vote, which is often seen as irrelevant or as a test of the resilience of national governments.  

Nothing could be further from the truth, for at least two reasons. The first is that the composition of the Parliament has important implications for directing European political and economic choices. As the institutions’ websites explain, one of the new Parliament’s first tasks after the elections is to elect the President of the European Commission, i.e. the EU’s executive body.  

Member States nominate a candidate for the position, but must take into account the results of the European elections. The European political party that obtains the most votes has the right to put forward a candidate for President of the Commission on behalf of the Parliament.  

The second reason is that the next five years will be critical for the economic future, in addition to other aspects, of the EU Member States and their citizens – at the crossroads of new globalization, competitiveness and sustainability.  

That future depends on how Member States are able to provide their citizens with the goods and services they need in a way that is accessible, reliable and environmentally friendly, while navigating the choppy waters of growing conflict between rival blocs.  

Making this happen is the challenge that the new MEPs and European Commissioners will have to face urgently, as Member States have committed to reducing greenhouse gas emissions by 55% by 2030 compared to 1990 levels and then becoming climate neutral in 2050. Achieving this will not be easy even for strong and cohesive European institutions, and it will be even less so if the institutions that have emerged from the vote are weak and divided.   

Not only peace and prosperity  

Since World War II, in order to counter some of the conflict’s causes – as well as, of course, some of its consequences – there has been an international, diplomatic and political movement aimed at achieving an integration of the various countries’ markets that has been both global and multilateral, i.e. not excluding anyone.  

Operationally, this effort required the creation of international organizations such as the United Nations, the World Bank, the International Monetary Fund and, subsequently, the World Trade Organization (WTO).  

The purpose of getting all countries around the table was to integrate the different economies in a way that was satisfactory to all. The result has been the development of globalization in a multilateral direction, which reached a tipping point in 2001 in terms of global participation with China's entry into the WTO.  

Initially seen as the crowning achievement of the multilateral integration process, Beijing's entry has proved to be disruptive. In fact, at the heart of the multilateral project was the idea that the free market was a prerequisite for successful economic growth of national economies, and that this success would have as its natural outcome democratization and pacification, in a virtuous circle of widespread wealth, peace and freedom. 

The rise of Beijing has shaken these beliefs. The free-market model of development, in which actors decide and act independently, is opposed by an alternative state-controlled model, characterized by a market regulated through centralized coordination under the leadership of a highly interventionist state.  

A widespread view, especially in the United States, is that it is precisely government control that is allowing China to gain the upper hand, competing unfairly in global markets after adopting the technologies developed in other countries, thanks to international trade.  

Hence the interventionist reaction of Washington and Brussels – at first latent and then increasingly evident – which came to theorize the need for "new" protectionism and a "new" industrial policy. Given that, for the moment, only the name seems to be new, the next Parliament and Commission will be responsible for deciding how to put this “novelty” into practice, without denying its own principles of economic and social freedom.  

European alternatives to the Chinese model  

Is it possible to successfully face the challenge posed by China without cloning its development model based on state capitalism that is incompatible with the spirit of Europe? The answer is not obvious, but succeeding will be important: at best the competition between state capitalisms is a zero-sum game and at worst it is negative sum. 

However, there is hope, and an example of this is offered by the ecological transition. The European Union firmly believes that climate change is a global problem that requires global solutions. A major cause of climate change is greenhouse gas emissions associated with carbon-intensive production.  

Left to their own devices, manufacturers typically do not consider the negative impact of their emissions on the climate, hence the idea of using a tax on greenhouse gas emissions (also known as a "carbon tax"). By imposing a “fair price” on producers for those emissions, it forces them to internalize the damage that carbon-intensive production does to the environment.  

This tax is clearly an additional burden for European companies and reduces their competitiveness compared to companies in countries that do not tax emissions. The EU is trying to solve this problem with a unilateral solution, called the Carbon Border Adjustment Mechanism (CBAM). 

This mechanism imposes a "carbon duty" on imports of products that are at risk of greater reduced competitiveness (such as cement, iron and steel, aluminum, fertilizers, electricity and hydrogen). The CBAM was introduced last May as part of the Green Deal and will enter into force in 2026. 

The CBAM can succeed in creating the conditions for balanced competition within the single market between European and imported products. On the other hand, it can do little to help EU companies compete in foreign markets with producers in countries that do not tax emissions. This would require an export subsidy, which would be difficult to reconcile with the WTO’s current rules.  

Work should therefore be done on a new multilateral agreement that would allow individual participating countries to choose between adopting a globally agreed upon carbon tax and, if not adopted, accepting an offset of such a tax through a combination of tariffs on its exports of carbon-intensive products and subsidies on its imports of such products from countries that adopt the tax. 

This is just one example of how global problems, such as climate change, require multilateral solutions.  

Even if going in this direction does not seem to be favorable, the next MEPs and European Commissioners should think long and hard before indulging in the nationalist and protectionist drift of Beijing and Washington.

translated by Jenna Walker