A good foreign policy, it has always been recognised, starts at home. Judged by this measure, the EU's foreign policy must be in deep trouble.
Output remains 7 per cent below the pre-crisis trend, public debt levels have reached all-time highs; banks remain fragile; workforce participation is low, and those who work take longer holidays, spend more time unemployed, and retire earlier than their US counterparts. In the medium term, Europe faces a sharplabour force contraction caused by adverse demographic trends. What's worse, Germany, the European export champion, faces a near 20 per cent drop in the size of its labour force over the coming two decades, whereas the US will see its workforce expand by more than 5 per cent.
Signals from Washington indicate that the US now looks to China, not the EU, as its main rival and partner on the world scene. Since China's accession to the World Trade Organisation in 2002, the two economies have become inextricably intertwined as global manufacturers use the China production platform to sell products into the US. The Chinese leadership, intent on achieving status on the global scene, has gone out of its way to knock the EU off its pedestal as a contender to being Washington's key partner.
There can be little surprise about the gloom surrounding the EU. All assessments appear to indicate that business as usual points to a downward track of growth at home and reduced influence abroad. Shrinking populations. Bankrupt governments. Frustrated publics. But if we wish for something better, perhaps we should start by thinking differently about Europe, and then matching our thoughts with our actions.
Europeans have thought hard about the disastrous first half of the 20th century and done everything to move away from the inherited chauvinisms that brought the tragedy on preceding generations. That is why some proclaim the EU as a postmodern entity, and reinvent our past in order to build a prosperous future. Our semi-sovereign states pool resources to co-govern each other, thereby setting an example to the rest of the world, which has no option but to follow suit. Global challenges require global responses and inclusive institutions. The EU leads the way into the global future as an example of how to anaesthetise old feuds, socialise national leaders into a shared project for the common good and show by policy the benefits of solidarity among the peoples. Only the blind can disagree.
There are two problems though. The first is that this postmodern view of Europe is not a description but a wish. The EU is better described as a mosaic of like-minded sovereign states, interdependent among each other and with the rest of the world.
They neither form a new sovereign nor constitute an international organisation, nor are they members of an EU federal state. As long as the EU is not a federal state, diplomacy between the sovereign states is its politics.
And because EU states are recognised sovereigns on the global scene, international diplomacy between its member states and their diverse external partners remains an integral part of intra-European politics.
For those who wish the EU to become a federal entity, the IMF contribution to the terms of the Greek bailout, capped by the China investment there, is a major humiliation. It shows that the EU cannot get its own house in order. By the token of the EU as a mosaic of interdependent states, it shows to the contrary that the open EU has calls on multiple sources of support to help get its house in order.
The second problem is that the postmodern view of Europe does not chime well with the rest of the world. Russia, China, India and Japan make the assertion of national sovereignty the kernel of their development at home and the assertion of their influence abroad. The ethos of the EU that the concept of sovereignty is old hat appears on the contrary as old Europe in a new, pre-imperial guise.
Non-European states may be forgiven for thinking that if Europe does unite as a new sovereign, we will be confirmed in our anticipation of its imperial pretensions as soon as its representatives start to talk down sovereignty, and talk up the benefits of pooling it.
Outside powers are more than capable of disentangling EU rhetoric from EU reality. EU member states remain the near exclusive proprietors of their citizens' loyalties. Better under these conditions, they say, to play on the EU's internal divisions by strengthening bilateral ties between Moscow, Beijing, Tokyo or New Delhi and the EU's national capitals, with a view to puncturing the EU's collective pretension to union. Let us divide now, so that we prevent a united EU from being tempted to rule later.
If Europeans follow this line of reasoning, they are likely to see conspiracies everywhere. Much better is to base policy on the confidence that the EU is unique to itself. It is not like others. Consider, for instance, the EU's external relations: the puritans of EU integration aspire for our member states and peoples to be exclusively married to Brussels. But our member states, and their peoples, think and act polygamously. They like to pick and choose who they live with. They get claustrophobia about the idea of monogamy.
Diplomatic polygamy is the European way of life and has been for centuries. That is why Europe has so many links into the rest of the world, unparalleled by any other continent. There is no part of the world with which one or other member state, corporation or citizen is not in touch.
Furthermore, Europe is one of the world's key economies. As the world's prime importer, it has to maintain open markets, not least because 16 of its member states have below 2 per cent of the EU total, while a further 6 have below 5 per cent each.
Most of these have anywhere between 60 and 80 per cent of their national economies accounted for by trade. Its labour force is 225 million strong and yields a per capita income of $32,000 (Dh117,532), less than the high productivity labour force of the US at $46,000 but six times that of China. The EU is China's prime trade partner, as it is for Africa, Russia, the Middle East and the Gulf states, and the Mediterranean countries, while counting among the top trade partners of Latin American countries and India.
More important, the European footprint on the world economy is huge. It is overwhelmingly the world's prime recipient of inward investment and is by far the largest source of foreign direct investment in the world.
Given the central role in the global economy of multinational corporations, the EU and the US both chose to place the great part of their stock in each other, while over the past two decades EU corporations have accounted for more than 70 per cent of the total inward investment to the US. The total stock of US investment in Spain alone is greater than the combined position of the US in China and India together.
How is it that the rest of the world either does not understand or does not take the EU as a serious player? The answer is that until the Europeans say who they are, they cannot expect others to appreciate how they play in international affairs. Europe's global presence starts at home.
Jonathan Story is emeritus professor of international political economy at INSEAD
