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Brussels Forum Views

Brussels Forum Views

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The 2014 Brussels Forum is built around the theme of “A World in Transition.”
The 2014 Brussels Forum is built around the theme of “A World in Transition.”

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Published by: German Marshall Fund of the United States on Mar 17, 2014
Copyright:Attribution Non-commercial


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Daniel Gros

The rise of China and other emerging market economies will change the

way in which the global economy works. The EU’s economy has been near
stagnation levels now for several years and most forecasts concur that it will be
unlikely to achieve a growth rate of 2 percent. The world economy, however, which
is expanding at a rate of 4 percent per annum and more, is not waiting for Europe.
This implies that for some time, the EU will remain among the three largest global
economic powers (along with the United States and China), but its importance will
decline relative to almost everybody else.

It is also clear that while the EU economy will remain an important element of the
world economy, this will not be the case for all of its individual member countries.
By 2030, probably only one European country — Germany — will rank among
the seven largest economies in the world. Today’s G7, which is comprised of four
EU member states, will either become irrelevant or see its membership radically

This shift in the global economic power balance has direct implications for a core
objective of the EU’s foreign policy, namely to foster the spread of its values of
democracy and the rule of law. This mission is so much a part of the raison d’être of
the EU that it has even been inserted into the Union’s external mission statement as
a legal obligation:

The Union’s action on the international scene shall be guided by the principles
that have inspired its own creation, development, and enlargement, and that it
seeks to advance in the wider world: democracy, the rule of law, the universality
and indivisibility of human rights and fundamental freedoms, respect for human
dignity, the principles of equality and solidarity, and respect for the principles of the
United Nations Charter and international law.

In fostering this foreign policy objective, the EU has traditionally relied on a
combination of its economic weight — as a large market and a source of capital
— and its soft power, that is, the power of attraction of its value-based integration
model. But over the next few decades, the economic weight of the EU will decline,
and its normative power has been diminished by its own internal problems and

The euro crisis has of course exacerbated this trend, as it has created the impression
among many other countries of a divided European Union unable to solve its own
problems. It has begun to be perceived as a continent where liberal democracy
is experiencing a certain retreat: for example, the recent constitutional reforms
in Hungary and the rising influence of EU executive bodies in dictating terms to
democratically elected governments to counter the sovereign debt crisis. The euro



crisis is now receding, but it has inflicted huge collateral damage in its wake, in
terms of lost output, lower growth prospects, and divisions among member states.

While the EU stagnates, all indicators point to the need for a strong force to stem
the tide of illiberal economies. The country ranked among the worst by Freedom
House — China — now accounts for over 40 percent of global growth, and those
with a middling record with the organization account for another 20 percent.
This implies that the global balance is tilting away from countries classified as free
toward countries that allow no freedom at all. This situation will put a strain on the
EU’s constitutional aim of spreading democracy, since it is much easier to insist on
partial improvements where at least a certain degree of freedom exists as compared
to totally unfree societies, where even the slightest concession on human rights is
unacceptable because it would expose a chink in the armor of the existing regime.

Democracy and human rights require not only formal procedures, but also a culture
of the rule of law. Similar trends can be observed as the center of gravity of the
global economy shifts away from countries that adhere to the rule of law, at least if
one uses the most authoritative indicator from the World Bank. The average rule
of law in the global economy, if countries are weighted by their GDP, has been
declining for some time.

In short, the global economy is becoming a tougher place for democracy and the
rule of law. And EU policymakers should begin asking themselves what they can
realistically hope to achieve given the rapidly diminishing relative weight of Europe.

Daniel Gros is the director of the Centre for European Policy Studies.



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