y to Germany and the EU alone
In the area of climate policy, two priority areas are relevant to foreign economic policy. First, the European Green Deal has direct and indirect effects on global trading partners. Second, it must be a goal of German and European policy to accelerate decarbonisation worldwide.
The European Green Deal has direct consequences for trade. The goals of full decarbonisation by 2050 and significant emissions reductions by 2030 mean the EU will import less fossil fuel. Energy suppliers in the European neighbourhood will be affected with direct impacts on their economic models and implications for political stability. Managing this political change will be a major challenge.
The energy transition also means the EU will need significant raw material imports for green technologies. Supply chains must be resilient to avoid new dependencies on raw material suppliers. Finally, falling demand for fossil fuels – of which the EU is one of the largest importers – will have a global impact in that, in principle, the price will fall. European foreign policy cannot ignore the Green Deal; on the contrary, it will have to manage its global impact. Europe needs a programme of aid and technical assistance to manage the transformation of economic systems to promote the development of green-energy production in the neighbourhood. Green hydrogen, for example, could become a new export commodity for countries suffering losses in fossil-fuel exports to Europe.
Meanwhile, global emissions continue to rise. The EU now contributes only about 8% of global emissions, far less than China (26%) and the US (13%). The European Green Deal alone can only make a small contribution to combating climate change. An agreement with the US on a carbon tariff or border adjustment mechanism would provide China with an incentive to step up its climate efforts, and could also spill over to other countries.
Technology cooperation with third countries, especially poor third countries, could help globalise the green deal by reducing the cost of green technologies. Flanked by financial support, this could reduce global emissions in a cost-effective manner.
- Leverage health policy for ethical and economic leadership
Health policy and pandemic control should also become one of the central pillars of German foreign policy, not only because of their economic relevance. To be sure, there has been significant progress in pandemic control. But the global economy remains vulnerable and worldwide the number of COVID-19 infections remains high, while new pandemics and other health risks could appear.
This presents a major economic opportunity for Germany and Europe because of their strong healthcare sectors. The EU could expand its role as a key global producer of essential medical goods. From a foreign policy perspective, most important is the global reputation that a leading role in pandemic response would bring to the EU and Germany. It is a moral imperative to deal with the health crisis as quickly as possible. The financial and technological capacity exists, and the EU should play a major part. The world cannot be safe as long as high levels of infection continue and new variants of the virus can emerge.
Towards a strategy
In times of major geopolitical tension and severe economic crisis, there is a political tendency to try to solve problems through protectionism. This is rarely successful. In Germany in particular, it would entail considerable risks for the export-oriented middle class and workers. Historical evidence even suggests that it is precisely severe economic crisis that could usher in a new golden age of globalisation. Germany and the EU can and should remain open, even if Germany’s current account surplus is closing.
Germany should therefore focus on managing globalisation and economic interdependencies rather than aiming for decoupling. Economic interdependence, however, also means vulnerability to political pressure from abroad. Three guidelines are therefore of central importance:
- In order to credibly enforce its positions, the EU 