En announcing, on Sunday June 9, the dissolution of the National Assembly on the evening of the election results, Emmanuel Macron transformed the European vote into a national issue. However, it would be appropriate to recognize the international issues of this election, in particular the strategic choices that the European Union will have to make, faced with the overwhelming Chinese rival and the cumbersome American ally.
When China announced its new so-called strategy “dual circulation”, in 2020, it claimed to reduce its dependence on foreign markets by relying more on its domestic demand. In this major rebalancing exercise in the Chinese economy, a dynamic domestic market would become the main engine of the country’s growth, which would remain open to international trade. This announcement was received with relief by Europe and the United States, whose industries had been disrupted since the beginning of the century by Chinese exports.
However, the persistent overcapacity of the Chinese economy, which continues to export goods at unbeatable prices, shows that this rebalancing has only been very relative: according to economist Brad Setser, China’s manufacturing trade surplus reached a record 2% of global GDP post-pandemic, far surpassing the record surpluses of yesterday’s exporting powers Japan and Germany. China seems incapable or unwilling to boost its domestic market and household consumption, which could further fuel trade tensions with the rest of the world. The Sino-American divide could become Sino-Western – if it is not already.
An alternative reading of the two American and Chinese giants?
The American recipe for dealing with economic pressure from Beijing is now well documented: based on a combination of customs tariffs and a proactive industrial policy, Washington intends to counter Chinese influence through massive intervention by public authorities. This approach is costly for American public spending and fuels inflation. It also assumes that the State is wise enough to take very long-term strategic bets by identifying key sectors – which could prove risky.
Joe Biden undoubtedly remembers the case of the solar company Solyndra: the Obama administration had granted a loan guarantee of 535 million dollars to the company, which then went bankrupt in 2011, sparking, in the middle of the electoral campaign, criticism of Solyndra’s ties to Democratic donors as well as the government’s management of the loan program.
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