Has Europe given up on free trade? | The Dip Podcast

Europe Between the United States and China

Europe is caught between an increasingly protectionist United States and an assertive China, raising doubts about whether it can preserve its commitment to free trade while protecting its economic and security interests.

Trade and the Changing Global Order

Europe’s trade stance is mixed. Abraham Newman said the EU is still pursuing trade agreements with Mercosur, Indonesia, India, and Australia, while also trying to defend industries such as autos and chemicals from Chinese competition. Hosuk Lee-Makiyama argued that Europe has not simply abandoned free trade; rather, the predictable, rules-based system it relied on has weakened.

Lee-Makiyama described an earlier period when Europe could trade on relatively stable terms, benefit from Russian energy and access to Chinese markets, and rely on US security guarantees. Both guests said that arrangement is no longer dependable. Newman added that US political support for free trade has faded across party lines, and that global trade networks can create vulnerabilities as well as prosperity.

Interdependence and Economic Security

Newman explained that trade was once expected to encourage political change, but that assumption often failed. Countries can instead exploit dependencies—for example, by restricting access to critical materials—to pressure others.

Governments need to identify these risks and respond where necessary, Newman said, while recognizing that economic-security arguments can also be misused to protect domestic businesses.

Investing in Resilience

Newman urged European leaders to be candid that greater security and economic resilience will require investment, potentially including higher taxes and greater public solidarity. He warned that without action, Europe could become dependent on either the United States or China.

Lee-Makiyama cautioned that resilience does not mean producing everything at home. Europe should account for geopolitical risks in its supply chains rather than focus only on scale and low costs.

Europe’s Strengths and Limitations

The guests disagreed about Europe’s strengths and weaknesses. Newman argued that Europe has substantial economic, research, and military capabilities but lacks confidence and a clear vision for the global order it wants to promote.

Lee-Makiyama rejected the idea that market size alone guarantees influence. He pointed to Europe’s weak growth and its companies’ tendency to invest abroad rather than develop new industries at home. He also stressed that Europe’s political and institutional limitations make it difficult to shape outcomes on security and other major issues.

Long-Term Competitiveness

Newman called for a bold European vision that could attract countries dissatisfied with US and Chinese approaches. Lee-Makiyama said Europe must modernize its economy and undo damaging policy and business decisions, or risk facing stronger competition not only from China but also from emerging economies such as India and Indonesia.

Presenters and Contributors

Cassandra (host); Abraham Newman; Hosuk Lee-Makiyama.