The meteoric rise of China in the Asia Pacific has been accompanied by its aggressive alliance-building strategies with littoral nations, Middle Eastern countries like Iran and Turkey, and with the erstwhile superpower Russia. Alongside the emergence of this non-conventional strategic grouping – which has been gaining the influence and prominence necessary to form a new pole in international relations – has been the energized consolidation of a more conventional type, comprised of States that have historically been alliance partners. Indeed, for most scholars, though these States – USA, UK, Australia, Japan, India, and members of the European Union (EU) – have generally cultivated close ties for several decades (or, in the case of the former two, centuries), China’s ambitious manoeuvres in the region and globally have provoked more concerted efforts to contain its accumulation of power.
This article aims to study the emergence of a new pole in international relations, which contests the one led by China. It will first summarize the development of the Quadrilateral Security Dialogue (Quad) as a strategic grouping in the Asia Pacific – comprised of the maritime democracies, USA, Japan, Australia, and India – that has operationalised the functional framework for the new pole. With a special focus on the perspectives of the member countries towards China, it will analyse the various challenges that the Quad has confronted and whether it forms a stable opposition to China’s regional hegemony. Second, it will assess the growth of the AUKUS as a more stable alternative operational framework to counter China in the region. It will consider whether it has the capacity to augment the efforts of the Quad, EU’s concerns about such a grouping, and USA’s efforts to mitigate the disagreements. Third, it will examine whether USA still has the capacity to lead this pole and possess global hegemon status and whether China may ever overtake the USA as a superpower. Fourth, it will review the deeply integrated trade relations between the USA and the EU, the various issues that may complicate them, and the dispute settlement mechanisms that have been installed therein. Finally, it will scrutinise the ‘special relationship’ between USA and UK as another factor bolstering the new pole.
Development of the Quad
The Quad has experienced a resurgence after having encountered a lull in 2008. Since November 2017, representatives of its member countries have convened at several high-level dialogues, including foreign ministerial-level and biannual senior-level meetings, and have firmly integrated this grouping within their bilateral and trilateral joint statements, arising after intense negotiation. The strategic importance of this grouping has increased with the finalisation of various agreements aimed at functional cooperation, including the Mutual Logistics Support Agreement between India and Australia, which would augment the interoperability between their militaries. The USA has also signed a similar agreement with India, along with the General Security of Military Information Agreement; the Logistics Exchange Memorandum of Agreement; the Communications, Compatibility and Security Arrangement; and the Basic Exchange and Cooperation Agreement for Geo-Spatial Cooperation Agreement. Japan and India also signed a long-anticipated Acquisition and Cross Servicing Agreement which would permit the reciprocal exchange of supplies and services between the two militaries during joint exercises including humanitarian assistance operations independently or under the aegis of the United Nations (UN), as well as port visits. In November 2019, the Quad countries conducted their second military exercise aimed at coordinating counter-terrorism initiatives, more than a decade after the MALABAR exercise comprised of Quad + Singapore. For all members of the Quad, the strengthening of alliances has been propelled by the realisation of the threat posed by an aggressively expanding China, which seeks to replace the conventional rules-based international order (RBO) – founded on ideals of democracy, sovereignty, and individual rights – with a contrasting order of its own. The President Xi Jinping government has formulated a deeply nationalistic and assertive foreign and domestic policy, through cracking down on pro-democracy protestors in Hong Kong, interning millions of Uighurs in Xinjiang, and upgrading its defence technology in the contentious East China Sea and South China Sea. A Chinese Coast Guard vessel sunk a Vietnamese fishing boat near the disputed Paracel islands in the South China Sea in April 2020. A Chinese survey vessel engaged in a standoff with a Malaysian oil exploration vessel near Borneo, provoking the deployment of American and Australian warships to the area. The Indian Army and the People’s Liberation Army (PLA) fatally clashed in the Galwan Valley in June 2020 for the first time since 1975. The USA also accused China of “unprecedented military incursions” against Japan in the East China Sea. Thus, though the Quad is a well-articulated, generally stable grouping, each of its members must encounter challenges to balance cooperation and competition with China. This is especially so because China has displayed a worrying pattern of manipulating economic interdependencies by imposing informal sanctions on recalcitrant countries.
Australia’s hesitance at engaging fully with the Quad became evident in 2007 after Kevin Rudd assumed Prime Ministership, with Foreign Minister Stephen Smith announcing Australia’s withdrawal from the grouping without informing any of the partner countries in 2008. For most scholars, the reason for Australian pessimism regarding the Quad was the thriving trade with China, with the latter becoming the second-largest destination accounting for 15% of the former’s exports in 2007. In 2017, China was Australia’s foremost export destination accounting for 35% of its exports, especially in coal and iron ore. However, this economic overdependency was also the reason why Australian policymakers and political leaders supported the revival of the Quad in 2017 and sought a value-based foreign policy collaboration with its “natural partners,” with Prime Minister Scott Morrison aiming to ‘restore trust” within the grouping. As China continues to weaponize exports as a response to criticism and to compel its trade partners to guarantee its foreign policy objectives, Australian legislation checking foreign interference in domestic affairs led to the “side-lining” of Australian wine and agricultural products exports by China in 2018. Moreover, after Australia backed an independent inquiry into the origins of the COVID-19 pandemic in 2020, China suspended beef imports, blocked barley imports through substantial tariffs on Australian grain, and imposed trade sanctions on exports of Australian wine, timber, and lobsters. Though Australia supplies China with energy resources and industrial raw materials, China is well poised to soon substitute these with its own resources gained from infrastructure development. Secondly, though Australian universities are dependent on Chinese fee-paying students, the model of authoritarian leadership in China has cost the former its academic freedom. It has also fomented concerns about the “unprecedented” interference by Chinese operatives “planted” in the Australian parliament seeking to influence policy through lobbying and lucrative financial relationships across party lines, aggravated by three Chinese cyberattacks on the parliament’s networks and those of the primary political parties in the days preceding the 2019 parliamentary elections. Indeed, because both the countries have deeply conflicting political structures and values, Australia’s integration with the Chinese economy has earned it the ire of public opinion, which has supported its participation in the Quad instead. Due to all these reasons, Australia’s 2016 Defence White Paper expressed its role in protecting the RBO in the maritime neighbourhood, delineated a plan to regenerate the Royal Australian Navy, allocated $48.75 billion to resolve capability gaps, and explicitly condemned China’s coercion in the East Asian maritime commons. As China multiplies the development and acquisition of ports, infrastructure facilities, and bases across the region – Fiji, Vanuatu, and the Manus Island in Papua New Guinea, there is cross-partisan unanimity in Australia for the development of foreign policy focused on South Pacific and Papua New Guinea that would restrict the former’s access to the Pacific Islands.
Like in the case of Australia, China’s polemic against the coming-together of the Quad also spurred India’s disassociation with it. As Prime Minister Manmohan Singh reiterated India’s historic independence of foreign policy at a 2008 address in Beijing, the lack of clarity in Indian foreign policy toward the Quad as an alignment of geopolitical trajectories led to the country being viewed as the “weakest link” in the grouping. Since February 2020, however, most likely stirred by China’s aggressive manoeuvres in its borders and in the Indian Ocean Region (IOR), Chinese support and protection of terrorist groups in Pakistan and in the Northeast, and its alienation from the UN Security Council (UNSC) and Nuclear Suppliers Group (NSG) led by China, India has emphasised the importance of strengthening the Quad partnership. Though there was significant scholarly ambiguity about the development of Chinese influence across strategic points in the IOR through a ‘string of pearls’ in the 1990s and 2000s, Xi’s Belt and Road Initiative (BRI) has caused these fears to materialise. The Indian Navy’s latest Maritime Strategy has underlined the importance of preserving trade and energy routes, maintaining freedom of navigation, preserving the accessibility of sea lines of communication, and strengthening the RBO governing the high seas like the UN Convention on the Law of the Sea (UNCLOS). Though India recognised that Chinese construction of artificial islands and militarisation of waterways in the South China Sea is gravely troubling, it has been understandably more perturbed by the “developments in the geostrategic environment” in its primary area of maritime interest – IOR and South Asia. India has also been concerned at the “all-weather friendship” between China and Pakistan, iterated in the China-Pakistan Economic Corridor (CPEC) as part of the BRI connecting Kashgar to the Gwadar Port in Pakistan’s Baluchistan province, allowing China to overcome the ‘Malacca Dilemma,’ and firmly establishing Chinese presence in the IOR opposed to India. Given the apparent inability of Pakistan to pay for the $62 billion CPEC infrastructure project and the realistically low economic viability of the Port, it is transparent that China’s efforts are purely to secure Chinese dominance in the region, to establish a submarine presence in the IOR, and amplify Pakistan’s Anti Access/Area Denial (A2/AD) capabilities in a potential naval war with India. Similar debt trap concerns have been raised over China’s acquisition of a majority stake with a 99-year operational leasing right in Sri Lanka’s Hambantota Port, the China International Trust Investment Corporation’s (CITIC) majority stake in Kyaukphyu – a deep seaport in Myanmar’s Rakhine state, the $3.4 billion debt that Maldives owes to China, and the free trade deal with expensive infrastructure projects in the Feydhoo Finolhu Island that Male has leased to Chinese developers. These ports are commercially unviable, and it is evident that none of these countries would be able to repay these debts. As its littoral nations become deeply indebted to China, fears have arisen in Indian foreign policy circles about China leveraging these debts to achieve its ambitions for power and influence in the IOR. The China-Pakistan friendship to the detriment of India has also become evident in China vetoing a UNSC resolution condemning Pakistan after the Pulwama terrorist attack by the Jaish-e-Mohammed (JeM) in February 2019 and shielding JeM chief Masood Azhar from being denoted a UNSC-designated global terrorist for a decade before finally conceding to do so due to international pressure after the 2019 Sri Lanka Easter bombings. China continues to support Pakistan-backed terrorists in Kashmir and internationalises the issue while also justifying the internment camps at Xinjiang as aimed towards counter-radicalisation. It has extended the CPEC across parts of Kashmir that India considers integral to its territory – violating Indian sovereignty and building an infrastructural base which would allow a swift mobilisation of Chinese forces to aid Pakistan in the event of a conflict with India. Indian intelligence agencies have also expressed alarm over China’s covert logistical, monetary, and training support to insurgent outfits in the Northeast, including the National Socialist Council of Nagaland, United Liberation Front of Assam, United National Liberation Front of Western Southeast Asia, and People’s Liberation Army (of Manipur). Due to these reasons, India has pursued more integrated relationships with USA in the Indo-Pacific through the Quad, a high-level 2+2 strategic dialogue, and has enhanced interoperability through bilateral exercises and logistics supply and communications agreements through cooperation with America’s Indo-Pacific, Central and African commands. It has also established a 2+2 ministerial-level dialogue with Japan, augmented bilateral military exercises, and cooperated in infrastructural development.
Japanese Prime Minister Shinzo Abe was one of the chief proponents of the Quad in the Indo-Pacific since 2007 and has emphasised upon the collective need of all members of the group to secure navigational freedom across the Indian and Pacific Oceans, specifically due to the Chinese navy’s incursions in the Senkaku and Diaoyu Islands in the South China Sea. This anti-China emphasis waned after Yasuo Fukada took over Abe’s office in 2007 and advocated for better relationships with China, abandoning the values-oriented foreign policy concept of the Arc of Freedom and Prosperity, which China objected to. Japan also cooperates conditionally with the BRI. Even so, Japan’s 2019 Defence White Paper underlined the threats posed by China’s defence competences in space, cyberspace, and the electromagnetic spectrum and increased military activities in the Indo-Pacific region. Japan has also transformed its Official Development Assistance policy to present an economic-strategic alternative to the BRI, viewing the Indo-Pacific as a priority for offering development assistance, “quality” infrastructure, and investment opportunities that respect the sovereignty and autonomy of the countries. As China has continued its efforts to expand its influence over the East China Sea through grey zones tactics and hybrid warfare – enacting the Territorial Sea law in 1992; including Japanese-administered uninhabited Senkaku Islands as its “affiliated” islands, and launching surveillance ships around these islands since 2008; incorporating Senkaku in its demarcation of its Air Defence Identification Zone; launching military intrusions by the coast guard, naval ships and air force beyond the Second Island Chain; and integrating navy and air force to augment A2/AD capabilities – Japan has expressed concern that China has effectively encircled Japan through its manoeuvres in the East China Sea, Sea of Japan and Pacific Ocean. China’s land reclamation activities and militarisation of islands in the South China Sea have caused apprehension in Japan not only because the region is essential to its trade and economic security but also because it has proven difficult to depend on US commitment in the region. The Quad is significantly important for Japan because it serves to anchor US engagement in the contentious Indo-Pacific. Article 9 of the Japanese Constitution proscribing the maintenance of a military force or the waging of war has provided the country with a pacifist inclination and prevented it from developing either defence capacities or a full reciprocal alliance with the US, even though it encounters a strained external environment. The 2019 Defence White Paper, however, recognises the need to protect Japan’s “self-sustained existence” amidst external threats and echoes Abe’s efforts to amend Article 9 to manage the changing security contexts. Though according to Article 9 in the Treaty of Mutual Cooperation and Security between the United States and Japan (1960), USA has the right to utilize Japanese territory for military purposes while guaranteeing its security, the Trump administration had expressed its disapproval of the agreement and of Japan’s dependence on American military expenditure. Thus, as Japan’s policymakers strive to adjust the security architecture to effectively cope with the threat environment, the ambiguity of the Quad’s purpose provides it with the opportunity to pursue deterrence in the Indo-Pacific while still adhering to Article 9.
Though the USA was cautious about appearing to lead a containment strategy against China for several years, the 2011′ pivot to Asia’ deepened American engagement with Japan, Australia, Thailand, and South Korea while necessitating that it balances security competition and economic engagement with China. Evolving doctrines of national defence and national security, however, have come to view China’s revisionism as the greatest geostrategic threat in the Indo-Pacific, challenging the USA’s global hegemony through exercising grey zone tactics and exerting its diplomatic and political influence through the BRI. The US Department of Defence (DoD) has viewed China’s rapidly modernising military through civil-military initiatives for defence technology production and ‘Made in China 2025′ policies as unfair protectionist practises aimed towards building a unipolar Asia and challenging the USA’s global influence through largescale operations. As China operationalises these tools in the Indo-Pacific – a region with the largest share of the global GDP, bustling trade routes, highest populations, and comprised of countries with power militaries and nuclear weapons – it threatens US interests in the region while also challenging the RBO. Indeed, the RBO was pioneered by the USA in the post-war period to create a framework for governing institutions and mechanisms aimed at stabilising the international order. It set norms for interstate trade practises and sovereignty that benefitted all countries but also helped sustain US hegemony. The connectivity and interlinkages pursued in the Indo-Pacific are a result of the RBO, and US views the Quad as a collection of countries seeking a free and open Indo-Pacific and aiming to diminish the advantages enjoyed by Chinese endeavours in the region. The Quad also acts as a force multiplier, enhancing deterrence and interoperability alongside the U.S. Indo-Pacific Command (USINDOPACOM), and bolsters US legitimacy in the region through cooperation with regional allies. Additionally, the geographical arrangement of the Quad countries also allows a geostrategic advantage of creating a “natural perimeter” for the US as a Pacific power, intense strategic competition with China. Though the USA has tried to recede from expensive conflicts in the Middle East – especially in Syria and Afghanistan, the Trump administration’s hostility toward Iran, lack of insight regarding Syria and Pakistan-backed Afghan Taliban, and sustained involvement in Yemen and Libya have continued to pull the US back into the region. This could threaten USA’s global influence as China moves to occupy the power vacuum in the Indo-Pacific through exerting economic and diplomatic influence via the BRI. The Quad, comprised of countries with similar political values and practises, are agreed that China’s authoritarian model of development – through mercantilism, human rights abuses in Tibet and Xinjiang, threats against democracy in Hong Kong, suppression of free speech of US businesses, and military power projection in the Indo-Pacific – is against the interests of regional security. For the USA, attempting to transform Quad 2.0 into a diplomatic rather than security grouping through ASEAN centrality, this remains the best method of containing China’s threats to its global influence.
Even as the Quad countries agree that China must be deterred, there is little agreement on how to do so among this informal grouping. Where the USA is pursuing the Cold War strategy of aggressive containment through public denunciation of China’s “exploitation, corruption, and coercion,” for Australia and Japan – who are heavily dependent on China as a trading partner – the US approach may be too extreme. In November 2020, both countries joined the China-led Regional Comprehensive Economic Partnership (RCEP), a free trade agreement between 15 Asia Pacific States accounting for nearly a third of global population and economic activity, indicating that neither are interested in halting their business with China. Thus, though China has criticised the Quad as a “US-led Asian NATO,” the difference in the perspectives and Indo-Pacific priorities of the member countries, as well as their reluctance to accept shared military risk, ensures that it is unlikely to evolve into a formal alliance that may assuredly cement the new pole. For the Quad to be able to effectively counter China in the region without reducing it to an arena of great power competition destabilising regional stability, it needs to offer an alternative to China’s economic diplomacy through a multilateral RBO. Its strength, however, lies in its semi-formality. Because it is not a hard security alliance, and it contains the traditionally non-aligned India, it has been difficult for the international community to heed China’s criticisms against it. Its objective must be to work in cohesion and involve European and Southeast Asian countries to effectively balance China’s reformulation of international norms.
Development of AUKUS
The differing perceptions of members of the Quad have set the stage for the emergence of a new strategic grouping – the AUKUS, a trilateral security pact between Australia, UK, USA for the Indo-Pacific, which was announced on 15th September 2021. As part of the agreement, UK and USA will assist Australia’s procurement of nuclear-powered submarines alongside military cooperation across a multidimensional range of “cyber capabilities, artificial intelligence, quantum technologies, and additional undersea capabilities.” The latter was further underlined in a November 2021 naval nuclear propulsion information agreement, allowing information-sharing to enhance mutual defence postures. For USA, the alliance allows the expansion of its sphere of influence in the Indo-Pacific and assists the maintenance of regional balance of power, especially as China increases its aggression towards Taiwan. Thus, according to President Joe Biden, USA seeks to “invest in its greatest source, its alliances” to bolster collaborative defence potential in the region to effectively check China. For UK too, the reinforcement of its traditional ties with Australia and USA would provide it more influence in the region, as China “embarks on one of the biggest military spends in history” according to Defence Secretary Ben Wallace. The AUKUS would allow the enhancement of joint capability development through information-sharing, and integration of defence and security research and development, technology, industrial bases, and supply chains. In 2021, UK’s HMS Queen Elizabeth Carrier was deployed to the Indo-Pacific accompanied by US personnel and equipment. In August 2021, the Carrier Strike Group also engaged in a series of joint exercises with Australia and other countries to better interoperability. For Australia, the acquisition of the nuclear-powered conventional weapon attack (SSN) submarines would allow it to confront the PLA Navy and the Chinese intermediate range ballistic missile (IRBM) arsenal more effectively, especially as a deterrent to China’s ambitions in Taiwan. Presently, the PLA has deployed DF-21 and DF-26 series of ballistic missiles on the Chinese east coast to thwart US aircraft carriers from entering the South China Sea in the event of a conflict in Taiwan. AUKUS would allow USA to enforce freedom of navigation and laws of the seas in the South China Sea, allowing the SSNs to remain underwater for longer than AIP diesel submarines. Indeed, as Prime Minister Morrison underlies the importance of “greater and more complex practical engagement between the Australian Defence Force and the Japanese Self-Defence Forces,” it is apparent that the effort is to attain convergence of Indo-Pacific policies and to pressure China to halt its aggressive forays into the region.
Though some have expressed that the AUKUS would diminish the Quad, most scholars believe that it would instead augment the shared vision that the latter possesses about the Indo-Pacific – based on freedom of navigation and rule of law. Indeed, as the members announced the trilateral partnership, they also reinforced the importance of other ongoing minilaterals in the region, including the Quad, ASEAN, and other partners like France which holds a direct material stake in the Indo-Pacific. Minilateral partnerships have increased exponentially in the region, with Quad members seeking to expand the Indo-Pacific strategic matrix by involving other countries to balance China – through trilaterals like Australia-India-Japan, India-Japan-U.S., Australia-India-Indonesia, Australia-France-India, and India-Italy-Japan. These partnerships have had strong political and diplomatic emphasis, though they have focused to some degree on military interoperability as well. The significant military component of the AUKUS could strengthen the Quad’s ability to counter China across a range of possible contingencies that may emerge in the region. The longer-term objectives of AUKUS also complement the goals of the Quad as it serves to construct a substantial number of coalitions based on shared political ideals and strategic interests, which could have the net effect of producing more holistic political and strategic consensus – all seeking to contain China in the region.
The AUKUS agreement, however, does suffer from some challenges. As the divide in the trans-Atlantic relationship between the US and Europe has been widened due to the latter’s withdrawal of troops from Afghanistan without the consensus of allies, France has felt gravely alienated and has recalled its ambassadors from US and Australia for the first time in 243 years. The EU has also expressed displeasure about Australia abandoning its relationship with France with the long-awaited EU- Australia trade talks postponed in apparent retaliation for the abrupt cancellation of the 2016 French-Australian submarine deal of $56 billion. France has also postponed the Franco-British Defence Ministers’ Summit. It is difficult to ignore the strategic role played by France in the Indo-Pacific, due to the presence of several French overseas territories in the region. France was also the first EU member State to adopt the geostrategic notion of the Indo-Pacific in May 2018, after President Emmanuel Macron declared France an Indo-Pacific power aiming to pivot to the region possessing a significant share of international trade and investment, along with a growing traffic of maritime trade. Thus, it is unsurprising that France would feel slighted at being overlooked in the formation of the AUKUS and has condemned the trust deficit that has arisen due to it. France also expressed concerns that the security agreement would compel littoral countries to choose between American or Chinese hegemony in the region, which would fuel regional tensions and jeopardise international nuclear stability. Comprehending the importance of maintaining the support of France and the EU as conditional to the success and legitimacy of AUKUS, USA proactively sought to mend the rift through a telephonic conversation between the French and American Presidents. While the latter acknowledged the importance of “open consultations,” the former was convinced to send its US ambassador back. Both countries highlighted the need to deepen “a process of in-depth consultations, aimed at creating the conditions for ensuring confidence” and set a presidential-level meeting in Europe for October 2021. It is important to note here, that the USA’s ability to mitigate intra-pole or intra-alliance disagreements is a significant reason why it continues to lead the new pole.
AUKUS does enjoy the support of littoral nations in the Indo-Pacific, though it has earned the ire of China for initiating an “arms race” that would destabilise the region. Japan, Taiwan, Vietnam, the Philippines, Indonesia, and Malaysia have expressed their support for the trilateral partnership, though the latter two have also expressed concerns about the potential presence of nuclear-capable weapons in their littoral waters.
Does USA still lead the new pole?
As China rapidly amasses global economic and diplomatic influence, it is primed to surpass the US as the world’s largest economy by 2028 and the USA’s military power through increased defence spending soon after. However, though China may acquire superpower capabilities to rival the USA, for most scholars, it will not replace it in international prestige and respect. USA’s democratic socio-political system will always enjoy ideological, political, and cultural superiority over China. One-party China’s juxtaposition of gradualist reforms and bureaucratic authoritarianism has allowed its impressive economic growth but has resulted in a centralised and suppressed polity that is potentially exceedingly vulnerable to instability. Indeed, if a polity is open and transparent, it is easier to find stirrings of political upheaval and mitigate them. Even Chinese citizens – students and businessmen – continue to emigrate abroad for employment and to avail the advantages of an open society, having little faith in the Chinese polity and providing a scathing indictment of the same. Though China has largely enjoyed political stability in the last few years, its own citizens do not possess the same trust and confidence in their leaders, as do American citizens in the stability of the American system. Ideologically, therefore, China would find it difficult to command the same respect toward its restructured international norms by other alliance partners, as has the USA for decades. While the USA enjoys a degree of geographical isolation away from countries contesting its geopolitical influence, China is confronted with neighbours Russia and India that also have ambitions towards regional hegemon status, with whom it has (or continues to) clash over border disputes and politico-military ambitions. While China’s relationship with its only significant ally – Russia, suffers from contradictions, the USA has continued to strengthen enduring political and military cooperation with regional superpowers UK, Germany, Japan, and Australia. Thus, even if China overtakes the USA economically, it is improbable that it will be able to achieve the same degree of international acceptance and cultural legitimacy enjoyed by the latter that allows it the ability to lead the new pole.
USA-EU trade relations
Another factor reinforcing the formation of the new pole is the integrated bilateral trade and investment relationship between the USA and EU – the largest globally – accounting for more than 40% of world GDP and more than 40% of global trade in goods and services. The transatlantic relationship continues to define the world economy despite China replacing USA as the largest source of import for EU goods in 2021, and despite the challenges arising from the COVID-19 pandemic. The total investment of the USA in EU is three times higher than all of Asia, while the total investment of the latter in the former is eight times higher than investment in India and China together. These investments drive world trade flows, creating employment, and contributing to growth on both sides of the Atlantic. USA and EU are each other’s primary sources of foreign direct investment, with the latter registering €2.2 trillion in outward stock and €2.0 trillion in inward stock in 2019. There is, however, no dedicated free trade agreement between the two after the negotiated Transatlantic Trade and Investment Partnership (TTIP) was halted by the Trump administration in 2018 and declared obsolete in 2019. Even so, transatlantic trade between the two enjoys one of the lowest average tariffs (under 3%) amongst all global financial transactions governed by World Trade Organization (WTO) rules. Currently, trade disputes between the two affect only approximately 2% of USA-EU trade, with most being mitigated by the WTO’s dispute settlement mechanism. The progress made is resolving longstanding trade disputes between both sides at the EU-US Summit 2021 is instructive in this regard. A Cooperative Framework for Large Civil Aircraft was created, and related US and EU tariffs were suspended for five years, to resolve the Airbus-Boeing WTO dispute. Both sides also committed to resolve the tensions that had arisen from the application of tariffs on imports of steel and aluminium from EU by USA under Section 32. Both sides agreed to utilise existing fora and ad-hoc meetings to recover their trade relationship from the losses that occurred in 2020. At the same Summit, the parties also launched the EU-US Trade and Technology Council (TTC) to foster a reinvigorated transatlantic partnership in the post-pandemic context, serving as a forum for the coordination of approaches related to global trade, global health challenges, green growth, economic and digital issues (such as artificial intelligence, quantum technology, and biotechnology), and deepening these transatlantic trade relations based on shared democratic values. After the first meeting of the TTC in September 2021, a Joint Statement entitled Towards a Renewed Transatlantic Partnership was released wherein both sides agreed to strengthen cooperation to bolster semiconductor supply chains, curtail non-market trade practices, and adopt a unified approach to regulating global technology firms based on reciprocal respect of regulatory autonomy. They also instituted an information-sharing agreement which would exchange learnings about best practises regarding investment trends affecting security, including industry-specific trends, origin of investments, risk assessment and management, and types of transactions. Another consequence of the Summit was the establishment of the Joint Technology Competition Policy Dialogue, aiming to reinforce collaborative research and innovation communications, stimulate a staff exchange programme between EU and U.S. research funding agencies, and explore new research initiatives to set common standards and foster innovation. The purpose of the Dialogue was to pre-emptively mitigate any challenges that could arise from differing approaches to competition policy and enforcement through enhanced cooperation in the technology sector. Both countries resolved to cooperate on cybersecurity information-sharing and certification of products and software, to bolster the legal certainty of transatlantic personal data flows that secure consumers and enrich privacy protection while facilitating transatlantic commerce. On 22nd September 2021, the USA and EU also announced a partnership to “donate, not sell” COVID-19 vaccines to developing countries and resolved to vaccinate 70% of the total global population by 2022. Calling for all countries to vaccinate their populations and augment their donation commitments or contributions to vaccine readiness, both parties increased their own vaccine contributions, with the EU announcing that it would donate 500 million doses in addition to those financed through COVAX. President Biden also announced that his administration would purchase an additional 500 million vaccine doses to disseminate in the “world’s poorest nations” and pledged $370 million to “support administering these shots and delivery globally,” and more than $380 additionally to Gavi – which supervises the daily operations for the COVAX project. Both countries also committed to reducing the tensions that have arisen from EU’s proposal to tax revenues generated by certain countries which provide digital services, through Digital Services Taxes (DSTs). The USA concluded a “political agreement” in October 2021 with Austria, France, Italy, and Spain on a transitional approach to their DSTs, while implementing a new global tax framework under the Organisation for Economic Co-operation (OECD)/Group of Twenty (G-20), which would be enacted in 2023.
However, the two partners do face some emerging issues complicating their trade ties. While the Biden administration has been keen to reach a successor accord to the US-EU Privacy Shield agreement for cross-border commercial data flows, EU’s top court had invalidated the agreement in 2020 due to continuing concerns about the American government’s surveillance practises. On the other hand, USA is wary about the EU’s proposals for a new carbon border adjustment mechanism (CBAM) and a new anti-coercion instrument (ACI) in its trade policy because it would assist the latter from deterring countries from pursuing trade or investment measures against its decisions – including the impositions of trade, investment, or other restrictions to its market. The EU has raised concerns about the “Buy American” public procurement rules that would provide tax credits for electric vehicles produced domestically, thus discriminating against EU automakers and stymying its access to the American sub-federal public procurement markets.
US-UK’s Special Relationship
The ‘Special Relationship’ between the USA and UK or its political leader forms another axis on which the cohesiveness on the new pole is founded. First arriving into popular usage in British Prime Minister Winston Churchill’s 1946, it denotes the close political, social, diplomatic, cultural, economic, legal, environmental, religious, military, and historic relations between the two countries, which have also been allies during several conflicts through the 20th and 21st centuries – including the two World Wars, the Cold War, the Gulf War, the Korean War, and the War on Terror. Indeed, though both countries have instituted close relationships with other partners through history, the level of cooperation between the USA and UK on all matters – trade and commerce, military planning and operations, nuclear weapons technology, intelligence sharing, and at the diplomatic working level – has been described as “unparalleled” by experts. Contemporary events, however, have induced new challenges to this relationship, especially as President Biden was denounced in the British Parliament for America’s “shameful” and hasty retreat from Afghanistan. Though these tensions somewhat lessened after Prime Minister Boris Johnson’s visit to Washington DC to celebrate the inauguration of the AUKUS and of the removal of the pandemic ban on British travellers to the USA, it is evident that the relationship between Biden’s post-Afghanistan USA and Johnson’s post-Brexit Britain would remain complex and transactional. For experts, UK’s derision to the Afghanistan decision could signal the termination of the special relationship – regardless of the abrupt closeness displayed – because it effectively communicated that Biden’s sole focus is American self-interest regardless of the temporary discontentment it causes among historical allies. The geopolitical threat posed by China in the Indo-Pacific has also impelled the USA to focus on the region and led to the AUKUS, where Britain benefitted, and France suffered the heavy losses of alienation and the scuppering of a multibillion-dollar submarine contract between itself and Australia. Indeed, though the alignment between US and UK interests and capabilities displayed through the AUKUS is promising, scholars are uncertain whether it could form a stable organising principle for US-UK foreign policy. Indeed, the compatibility between the personalities and values held by Biden and Johnson is questionable, especially as the former had called the latter a “physical and emotional clone” of then-president Donald Trump. Though both countries are negotiating a free trade deal to be completed by 2024, the fact that President Barack Obama (with Biden as Vice President) in 2016 had warned that UK would be at the “back of the queue” for any trade deal post-Brexit, especially if the peace in Northern Ireland is jeopardised in the process. UK has attempted to deepen its relationship with the USA and China after Brexit, but it is evident that the USA would be uncomfortable with the same.
For any pole to remain cohesive and stable, it is essential that there be internal mechanisms for peaceful settlement disputes (since it is impossible that disputes will be avoided altogether). It is also important that there exist institutional frameworks within which intra-pole coordination would be operationalised. Additionally, the coordination between the members of the pole should ideally contribute to the betterment of issues affecting the international community. The relationships between the USA, EU, UK, Japan, and Australia certainly possess these features.
- Congressional Research Service. (2021). S.-EU Trade and Economic Relations. Washington DC: Library of Congress.
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