The Networking of U.S. Foreign Policy: The Importance of Europe

The concept of global strategic partnerships is commonly taught in international marketing courses in business schools around the world. The best way to describe “GSPs,” as they are called, is as linkages between companies from different countries to jointly pursue a common goal while remaining competitors in other areas.

An easy example of a GSP is the airline industry, where a Delta Airlines will join forces with an Air France-KLM in certain areas of the world and compete with it in others.

The most important attributes of a successful GSP are:

• Partners must remember that they are competitors in other areas.
• Harmony on all issues is not the most important measure of success.
• The relationship is reciprocal. Each partner possesses specific strengths that it shares with the other. Learning must take place on both sides.
• Governance: Consensus must be the norm. Partners must be viewed as equals.
• Culture: A shared set of values must be successfully developed.
• When competing in markets excluded from the partnership, the participants retain their national and ideological identities.

The flexible concept of global strategic partnerships also perfectly suits U.S. foreign policy in the new networked world, where economic and geopolitical relationships often are one and the same.

It’s a world where China, India and Brazil rightfully feel that their role at the table should be equal to their economic abilities — a world in which the role of the United States is changing from being the founder, policeman and guarantor of globalization to being an enormously powerful partner, protecting her own interests and values.

When viewed in the context of foreign policy, the best possible example of a GSP is the much neglected, often battered EU-U.S. economic/trade relationship.

Even though the headlines are about the economic growth of China, and although it has become a right of passage for conservative U.S. politicians to bash Europe and talk about the fear of creeping European socialism, the European Union — not Asia — is America’s most important economic relationship.

The U.S.-EU trade relationship, which many are now calling the transatlantic economy, is not only the largest in the world, but based on its size is the most important.

The numbers are staggering.

The EU is the United States’ largest trading partner, with $320 billion worth of European goods going to the United States and $240 billion of U.S. goods going to Europe as of 2010, totaling approximately $560 billion in total trade.

In terms of goods as well as services, the EU is the number one export market for the United States. Bilateral trade in goods and services totaled $975 billion in 2008, or almost $3 billion each day.

And if you look beyond trade, the relationship becomes even closer.

The EU and the United States enjoy the most integrated economic relationship in the world, illustrated by unrivalled levels of mutual investment stocks, reaching over €2.1 trillion. Total U.S. investment in the EU is three times higher than in all of Asia, and EU investment in the United States is around eight times the amount of EU investment in India and China together.

Despite the fact that any headlines about U.S.-EU trade are usually about trade disputes, the reality is much different. Trade disputes represent only 2% of the volume of trade flows. To a certain extent, much of the publicity around these disputes is more about local politics than the actual size of the dispute.

As Stuart Eizenstadt, former U.S. ambassador to the EU, stated in his testimony to the U.S. Congress on July 27, 2010, “Few are aware that the United States has invested twice as much in tiny Ireland than it has in all of China, with U.S. investment in India’s fast-growing economy smaller still.”

One of the most important attributes that makes a GSP work is cultural affinity. And in this area, the United States and the EU have more in common with each other than with any other area in the world. There is truly a shared culture, with both holding beliefs in free societies protected by the rule of law, free markets legally protected by property rights, contract sanctity and intellectual property rights — and with both providing strong support for private enterprise, competition and innovation.

The interconnectedness is so deep and flows so naturally that in certain areas, each side indirectly has given up some sovereignty to the other. A prime example of this is the Kellogg Company of Battle Creek, Michigan.

We are all familiar with the side of the Rice Krispies or Corn Flakes box that lists the various nutritional facts and ingredients contained in the cereal. Rather surprisingly, this listing, and thus the ingredients in the cereal, is made to European Union regulations and not to the laws or regulations of the state of Michigan, or the U.S. government.

Since the EU is as large a potential market for Kellogg as the United States, and since EU standards are more stringent, it makes economic sense for Kellogg to manufacture the product to EU standards.

What makes the concept of a global strategic partnership perfect for U.S. policy today is its flexibility, its underlying principle that in other areas of the world you are competing with each other — but that competition should in no way hurt the ongoing relationship.

To a large extent, that is exactly what Europe and the United States do in terms of their trade and economic relations with India and Asia. In these markets, each side aspires to lead in setting rules for global trade and investment, naturally to benefit their respective companies.

In Asia, both the United States and the EU are trying to secure bilateral and regional trade agreements to support their own individual economies or geopolitical strategies.

But what makes the GSP even more important is that it gives us a tool to determine the most important geopolitical/economic relationships to the United States and the true strengths and flexibilities of those relationships.

And in looking at the world in that manner, the somewhat neglected, “unsexy” EU-U.S trade relationship must be considered the prime relationship of the United States — and of Europe.