By Dalibor
Rohac
Monday,
August 15, 2023
Should
the United States be more like Europe—greener and with a more generous social
safety net? For most on America’s left, the answer is a no-brainer. But recent
developments remind us that the European model comes with a hefty price tag.
Europeans
seem to want to have it all: stringent environmental and regulatory standards
to drive decarbonization; “strategic autonomy,” especially from powers such as
Russia or China; and rising levels of economic prosperity. These goals form a
policy trilemma. Europeans can pick two—or a limited combination of the
three—but they cannot pursue all three at once. And that should be a warning to
Americans.
Already,
Europe’s growth record is deeply unflattering. Between 2000 and 2019, the EU’s
economy expanded at an average annual rate of just 1.4 percent. If the United
States became a member of the EU, it would be its
third wealthiest member, right after Luxembourg and Ireland, whose national
income statistics are skewed by the presence of headquarters of large
multinational companies operating across the EU.
Conversely,
if EU member states joined the Union, they would be on its poorest fringe: In
terms of purchasing power, Austria, Sweden, and Germany, some of the EU’s most
prosperous economies, are poorer than Oklahoma or Tennessee, which fall into
the bottom third of U.S. states by real per-capita income. Spain and Portugal,
alongside the growing-but-still-poor Eastern European countries, have lower
incomes than the least well-off U.S. economy, Mississippi.
It is
dawning on some Europeans that having it all is impossible. Consider, for
example, the recent fight over the passage of the EU’s Nature Restoration Law,
proposed by the European Commission, which sought to convert as much as 10
percent of Europe’s arable land into forests and other biodiverse ecosystems,
thus reducing the bloc’s agricultural output.
The bill
was attacked by Manfred Weber, the leader of the
European People’s Party (EPP), on the grounds that it would harm farmers and
that it was bad to threaten food supplies in a time of war. That put him at
odds with EC President Ursula von der Leyen, a fellow member of the EPP, who
has made an ambitious environmental and climate agenda central to her
tenure.
Weber
failed to stop the nature restoration law, which was passed with a small number
of EPP votes. Yet, he has succeeded in getting the bill watered down
significantly—its provision to convert agricultural land was dropped, and its
implementation was delayed until a review of its impact on the EU’s food
security is completed.
Not only
is there a trade-off between environmental goals and economic growth, but the
single-minded pursuit of the former can clash with the objective of making the
EU less dependent on other powers. With the EU’s planned phasing out of new
combustion engines by 2035, it is all but inevitable that Europe’s automotive
industry’s ties to China, a major producer of both batteries and electric
vehicles (EVs), will deepen. As of now, European auto manufacturers have no alternatives to Chinese batteries—a
situation that will only get worse if European EV production grows in scale.
Going
green, fast, will cost—both in terms of money and in terms of creating a new
dependency on China. Faster growth can be squeezed out of the European economy
either through deregulation driving up productivity at home—think easier
land-use rules, more fracking, and more dynamic labor markets offering weaker
worker protection—or through an ambitious trade agenda. For more
“strategic autonomy,” Europeans need to get ready for EU-produced goods and
services that are more costly or inferior to imported alternatives, or for
a regulatory scheme that would make European industry, energy extraction, and
other sectors competitive.
Weber’s
revolt has provided an opening for a much-overdue conversation about the hard
choices before Europe. To instead continue to assume that Europeans can be
pushed into more economic hardship for the sake of lofty environmental goals at
a time when their real incomes are stagnating and when the continent faces
unprecedented geopolitical threats is not only bad politics but also terrible
statecraft. Let the magical thinking that dominated Europe’s policy debates for
far too long be a warning to the United States—not an example to follow.
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