The new US President Joe Biden asserted he was committed to rebuilding America’s alliances after years of neglect and disdain. Europeans, frustrated by former President Donald Trump’s treatment of them, were anxious for a new beginning. Throughout the year, significant breakthroughs were made resolving bilateral trade disputes, launching technological cooperation, and coordinating relations with China.
But 2021 was also a year marked by Washington’s failure to consult Europeans before the mishandled pullout from Afghanistan, growing US preoccupation with China, and European worries about the uncertain reliability of American democracy.
As 2022 dawns, transatlantic relations have clearly entered a new era. There is a deepening appreciation that Europe and the United States face shared challenges best addressed together. The Russian troops massed on the Ukraine border as the new year begins are only one immediate example. At the same time, there is a realization that the United States may be a less reliable partner in the future and that Europe must finally take on more responsibilities on its side of the Atlantic and around the world.
This appraisal of transatlantic relations in 2021 grew out of the German Marshall Fund-Bundeskanzler Helmut Schmidt Stiftung 2020 Task Force report on transatlantic relations. This current assessment is based on over 50 interviews that Bruce, who is lead author, conducted with US and European foreign policy, security, and economics experts. The interviewees gave their time freely and their input is much appreciated. To ensure candor, all conversations were on a not-for-attribution basis. Nonetheless, the judgement of developments in transatlantic relations in 2021 is the sole responsibility of the authors.
“This first year of the Biden administration went about as positively as I hoped it would on the day of his inauguration,” said a former German ambassador to the United States. “When Biden said in February ‘we are back,’ there was some doubt that he could do that, but generally there is an appreciation that the United States is still a European power.”
“There were lofty expectations, especially among [American] Europhiles, that Europe would be more of a priority in overall Biden foreign policy,” concluded a foreign policy analyst at a Washington think tank. “There was this sense we would see a new day in the partnership and that the United States and Europe would start writing the rules of the road.”
Europeans are broadly delighted to see Biden as president,” observed a former adviser on Europe in the Obama administration. “The glass is three-quarters or four-fifths full.
The 2021 transatlantic accomplishments were, indeed, significant. The longstanding Airbus-Boeing dispute over government aircraft subsidies was shelved. US tariffs on European steel and aluminum were lowered, averting a trade war. Europe and the United States spearheaded an international accord committing nations to a minimum global corporate tax rate. Some progress was made in addressing climate change. Brussels and Washington created a Trade and Technology Council to coordinate supply chains and technology policy. And a shared perception of China as a “strategic competitor” drove transatlantic convergence on dealing with Beijing.
“Europeans are broadly delighted to see Biden as president,” observed a former adviser on Europe in the Obama administration. “The glass is three-quarters or four-fifths full.”
But transatlantic relations have also been battered by jarring discontinuities and troubling uncertainties that cast a cloud over 2022.
The US pullout from Afghanistan in August followed by the September announcement of the sale of US nuclear-powered submarines to Australia as part of a trilateral security pact (dubbed AUKUS because it also involved the United Kingdom), which supplanted an existing deal Paris had with Canberra, further undermined European trust in the United States.
“We were not surprised by the [Afghanistan] decision,” said a French security expert. “The departure was foreseeable.” But Europeans who had readily joined the US invasion of Afghanistan in 2001, as a gesture of allied solidarity, felt they had simply been informed by Washington, not consulted, about the withdrawal.
“You have to know that you have no other friends than Europe,” warned a Polish foreign policy expert. “If you screw up talking with us, that undermines the US system of alliances and that is not useful for the United States.”
And, added the head of a Brussels-based think tank, “AUKUS confirmed France’s longstanding fears of the United States. A lot of trust was lost and that is a very difficult thing to pull back.” Moreover, to many in Paris, the involvement of the United Kingdom only added insult to injury.
Compounding these two high-profile episodes was the European realization that China, not Europe, now preoccupies White House officials. “Anxiety, skepticism, and bad juju around the pivot to Asia is prevalent everywhere in Europe,” said a Berlin-based analyst. “The fear is that it will lead to transatlantic decoupling.”
But Europeans also acknowledge they share responsibility for lingering transatlantic discord. “I would have expected that Biden’s invitation to move beyond the Trump interlude and to team up would have been met by the European side with more enthusiasm,” observed a disappointed Green Party member of the European Parliament.
The Challenges that Lie Ahead
“America still acts as if it is the leader,” observed a disdainful Social Democrat member of the European Parliament. “But the preconditions for transatlantic leadership have changed fundamentally. America is not as sovereign as it used to be. America needs its allies as much as the allies need the United States.”
One of those allies is the new German government. American administrations have long relied on London to protect US interests on the continent. But, since Brexit, Washington has had to rely ever more on Berlin. In 2021, that meant a lame-duck Merkel government that was not enthusiastic about a tougher stance on China and did not want a new Cold War with Russia. “Most of the concessions that the Biden people have made—on tariffs, on minimum global tax rate, on Nord Stream 2—were all aimed at winning Germany over as a partner,” said a Berlin-based observer. “And, frankly, Berlin just pocketed all that.”
In 2022, with a new German government, there is an opportunity for greater cooperation. The new German Chancellor Olaf Scholz “considers Biden a like-minded leader,” said a Berlin foreign policy expert. “There is plenty of interest in working more with the United States on a whole range of issues.”
The Russian threat to invade Ukraine poses the most immediate test of transatlantic cooperation in 2022. How Europe and the United States respond—their ability to stay united in resisting Moscow’s demands for a sphere of influence in Eastern Europe and, if necessary, their steadfastness in maintaining joint economic sanctions against Russia that will prove more costly for Europe than for the United States—could be the most significant test of the security alliance since the Cold War.
No longer in Europe are they talking about who is the sick man in Europe,” noted a worried New York-based foreign policy expert. “It’s America that is the sick man.
Going forward, there is also unprecedented European uncertainty about the trajectory of US democracy and what that means for transatlantic relations. The International Institute for Democracy and Electoral Assistance, based in Stockholm, has judged the United States a “backsliding democracy.” And a median of only 18% of the publics in nine European nations believes that US democracy is a good example for other countries to follow. “No longer in Europe are they talking about who is the sick man in Europe,” noted a worried New York-based foreign policy expert. “It’s America that is the sick man.”
The upcoming 2022 US Congressional elections and Biden’s fading public opinion poll numbers have Europeans quite worried.
“There is panic on what will happen in the United States,” said a Washington-based veteran of transatlantic relations. “Europeans hear that the Republicans may win the House and Senate in 2022 and the White House in 2024.”
“The Biden administration is working in a very narrow window of opportunity,” noted a US expert at a British think tank. “We may only have 10–11 months,” added a worried Social Democratic member of the European Parliament, “because after the midterm elections, things may be different.” And then the question will be, observed a former high-ranking EU official, “will Biden have any political capital to expend on things that are important for Europe?”
In February 2021, Biden told the Munich Security Conference that “America is back.” But in transatlantic relations, there is no return to the status quo ante. The domestic and international challenges facing both Europe and the United States have changed. The Trump experience, Afghanistan, and the US pivot to Asia have left Europeans wondering if they can count on the United States. Moreover, Washington’s slowness to move on lifting the steel tariffs, its inability to deliver more meaningful commitments on climate change, and the worsening partisanship of US domestic politics “has fed a conclusion in Europe that the relationship with the United States will never go back to 2016,” said a former US ambassador to NATO. “Domestic US politics will make it more difficult for the United States to lead in the traditional way, to provide public goods, even if Trump does not come back.”
“A fundamental trust has been broken,” he concluded. “The challenge is to find a new purpose for the relationship.”
The accomplishments, and the shortcomings, of the transatlantic relationship in 2021 provide a cautionary roadmap of what that new relationship can be in 2022 and beyond.
Trade Cooperation Promising
Cooperation on trade issues has been a very positive development in transatlantic relations in 2021, both symbolically and politically, even if it took some time to develop.
Burned by their frustrating efforts to negotiate the Transatlantic Trade and Investment Partnership during the Obama years and mindful of the Biden administration’s wariness of protectionist sentiment among its voting base, neither Brussels nor Washington has evidenced any interest in a bilateral trade agreement. Similarly, London’s entreaties for a UK-US free trade deal have fallen on deaf ears in Washington.
Nevertheless, important progress has been made on the trade front. At the beginning of Biden’s term, the transatlantic landscape was littered with both longstanding and more recent trade disputes. The two sides have been fighting over aircraft subsidies to Boeing and Airbus for 17 years, with the United States winning and exercising the right to retaliate in 2019 and the European Union getting the green light to strike back in October 2020. In June 2021, at the US-EU summit in Brussels, officials agreed on a five-year suspension of retaliatory tariffs in this dispute. And a working group was established to discuss subsidy limits in the face of prospective commercial aircraft competition from China. (They also agreed to establish the Trade and Technology Council, but that is covered in the next section of our review.)
Past victims of these tit-for-tat tariffs could not have been more pleased. “Ask a French wine exporter if he thinks Biden is no better than Trump,” said a senior French trade official, underscoring the importance of this agreement.
On the margins of the G20 Summit in October, Washington and Brussels agreed to end prohibitive tariffs imposed by the Trump administration on European shipments of steel and aluminum with a quota that will allow these European products to enter US markets duty-free. In return, the EU dropped retaliatory duties on high-profile US exports. Washington and Brussels also agreed to revive multilateral efforts to reduce global overcapacity in steel production, a three-decade-old ambition that is even more urgent today thanks to China’s massive production levels.
Although trade economists complained that the deal was “managed trade,” a former European business lobbyist praised the progress: “I am impressed by the pragmatism on both sides, especially with regard to steel and aluminum. Biden needed a deal to sell to his electorate and the European steel industry is suffering. It was a pragmatic solution that I did not expect at the beginning of the year.”
Biden needed a deal to sell to his electorate and the European steel industry is suffering. It was a pragmatic solution that I did not expect at the beginning of the year.
As a means of slowing global warming, the EU plans to impose a “carbon border adjustment mechanism,” a fee on CO2 emission-intensive imports, such as steel and cement. This tax is meant to ensure that European producers are not disadvantaged by Brussels’ efforts to curb such emissions, which will raise domestic production costs. With the United States unlikely to impose its own border tax, new transatlantic trade friction would be inevitable. To head this off, Washington and Brussels say they will develop a plan by 2024 to favor the imports of low-carbon steel and aluminum. In itself, commented a former high-ranking EU trade official, “this ‘green steel’ deal is not meaningful, it’s spinning something with very little content. But it could lead to sectoral carbon deals” that might help avoid an inevitable trade fight over how best to slow climate change.
In the G20, European governments and the United States spearheaded an agreement on a 15 percent minimum global corporate tax rate on the profits of large multinationals, while allocating a portion of those revenues to the countries to which those companies export. The agreement is aimed at minimizing decades-old tax competition between nations. If implemented, this minimum tax could provide a major curb on corporate tax avoidance using tax havens. It should also roll back the threat of digital services taxes that several European nations have imposed or plan to implement, which the US government has deemed unfair (but suspended retaliation pending multilateral solutions).
There has been one significant exception to closer transatlantic relations on trade: a lack of progress on reform of the World Trade Organization (WTO). The WTO is dysfunctional, both as a negotiating forum—where it has failed to produce major trade liberalization—and as a dispute settlement mechanism—because the United States, frustrated by decisions it disagreed with, has refused to assent to the appointment of members of the appellate body created to settle disputes. So far, the Biden administration has blocked resolution of this impasse due to “systematic concerns” about the dispute body overstepping its mandate.
Before Biden’s inauguration, incoming senior US officials vowed that WTO reform would be their top trade priority. The administration did end the standoff that had prevented the appointment of Ngozi Okonjo-Iweala as WTO Director-General. But other than that, one year into Biden’s term there is no tangible evidence of any US effort toward progress at the WTO.
“The United States is absent in Geneva,” complained a former senior WTO official, who ominously speculated: “Does the United States still need the WTO if it wants to weaponize trade against China? To do that, you need to get rid of the WTO.”
Developments in 2022 could well foreshadow the WTO’s fate. The United States, Europe, and Japan have revived their plurilateral talks on new subsidy disciplines, which they then want to multilateralize through the WTO. Success would help revive the Geneva-based institution. Failure, coupled with a continued stalemate on dispute settlement, may mean Europe and the United States will need other venues to develop new trade rules and resolve disputes.