The briefing paper by David Bosold and David G. Haglund examines the “special relationship” between Canada and Germany through the lens of “strategic culture,” using the symbols of middle power and linchpin as analytical anchors. The authors compare the landmark speeches by Canadian Prime Minister Mark Carney at Davos (January 2026) and German Chancellor Friedrich Merz at the Munich Security Conference (February 2026), arguing that media coverage has glossed over a crucial divergence: Carney declared a definitive “rupture” with the old transatlantic order and called for broad middle-power solidarity, while Merz urged allies to “repair and revive transatlantic trust” within an explicitly Western, values-based framework.

The paper then turns to Canada’s pending submarine procurement decision — German/Norwegian TKMS 212CD versus South Korean Hanwha Ocean — framing it as a strategic litmus test. The authors argue this choice should not be read as a revival of Pierre Trudeau’s failed “Third Option” trade-diversification strategy, nor should it be driven primarily by economic offsets. Instead, they contend that NATO interoperability, Arctic sovereignty, and transatlantic alliance cohesion must take precedence, making the German/Norwegian bid the strategically superior choice.

Read the full paper here: A different kind of linchpin

Der Beitrag Canada, Germany, and the Future of the Western Alliance erschien zuerst auf Atlantik-Brücke e.V..

The 39th German-Canadian Conference, organized by Atlantik-Brücke and its Canadian counterpart, brought together policymakers, industry representatives, and academics from both countries in Berlin on May 18 and 19, 2026. The first day began with a visit to the Bundesrat, followed by a joint event with the Transatlantic Business Initiative at the Haus der Deutschen Wirtschaft. The focus there was on critical minerals and the German-Canadian Memorandum of Understanding on raw materials cooperation between the two countries.

The main conference day on the second day at the Canadian Embassy covered a wide range of geopolitical and societal issues: topics included transatlantic research cooperation, the strategic importance of the Arctic, the EU-Canada Security and Defense Partnership, the upcoming AI transformation in the media industry, and the German-Canadian Digital Alliance.

On the sidelines of the conference, we interviewed Michael Hüther, Director and Member of the Presidium of the German Economic Institute as well as Vice-Chairman of Atlantik-Brücke and Prof. Nik Nanos, Founder & Chief Data Scientist of Nanos Research and Chairman of Atlantik-Brücke Canada. Both have been integral parts of the conference for a decade and spoke with us about how the conference’s topics have been influenced by the geopolitical upheavals of recent years, why academic freedom is a competitive advantage for middle powers like Germany and Canada and how they view their respective governments’ track record after their first year in office.

Recommended reading: The briefing paper by David Bosold and David G. Haglund examines the “special relationship” between Canada and Germany through the lens of “strategic culture,” using the symbols of middle power and linchpin as analytical anchors.

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The focus was on how financial markets, technology, and supply chains are holding their own amid the geopolitical pressures of our time. Key topics included the role of global financial capital in the tension between profit, security, and political stability, as well as the booming defense sector: Where does the line between commercial technology and military power lie in the age of dual-use applications?

Other panels examined the transatlantic AI model, the future of the financial system in the digital age, the geopolitical significance of the semiconductor industry, and the new industrial policies of the major powers. The event concluded with a debate on the resilience of global supply chains.

Our sincere thanks goes to Deutsche Bank, which was an outstanding host of the conference.

Der Beitrag Semiconductors, High Tech, Trade Power: The German-American Partnership Seeks New Answers erschien zuerst auf Atlantik-Brücke e.V..

In public discourse, defense still triggers familiar reflexes: images of heavy platforms, complex procurement processes, and cumbersome institutions dominate. But this understanding falls short. Modern warfare is undergoing a fundamental transformation — technologically, structurally, and strategically. In reality, defense is evolving into one of the most dynamic technology fields of our time. The central question is no longer whether technology is changing warfare, but who is developing the systems that will determine Europe’s security and capacity to act in just a few years’ time.

From Product to Capability

[related] A core problem lies in the traditional understanding of procurement. For decades, defense was oriented toward acquiring products: platforms, hardware, clearly defined systems with long life cycles. But the reality of modern operations demands something different. What is needed today are adaptive capability packages that evolve continuously. Software is becoming the central element. Systems no longer consist of self-contained units but of networked architectures — so-called “systems of systems.”

In this context, a drone system is no longer a static product but a dynamic software stack with attached hardware. It requires regular updates, rapid iterations, and immediate user feedback. Equally critical is usability: systems that are not intuitive in the field lose their value regardless of their technical quality. Those who continue to rely on the logic of traditional product procurement risk working past the requirements of modern warfare.

Structural Inertia as the Result of Political Decisions

The often-criticized slowness of existing systems is no accident. It is the result of political priorities set over the past decades. After the end of the Cold War, the deliberate focus was on stability, efficiency, and risk minimization. Today’s system meets precisely those requirements. But it is not designed for speed. With the return of geopolitical tensions and an increasingly dynamic threat landscape, however, the benchmark is shifting. Technological developments and operational requirements are changing in ever shorter cycles. Systems that think in decades are coming under pressure to adapt. The necessary acceleration is therefore less a technical question than a political and structural one.

Innovation Dynamics and Industrial Reality

Technological leaps frequently originate outside established structures. New companies can operate free of institutional baggage, iterate faster, and think consistently from the problem outward. Established players, by contrast, are geared toward stability and long-term commitments. For them, new technologies often mean far-reaching adjustments to existing business models and processes.

This does not create a contradiction but a field of tension: innovation often emerges from new players, while scaling, integration, and long-term operation remain the strengths of established structures. The strategic challenge lies in effectively connecting both worlds.

The Competition for Talent and Technology

It is precisely at this interface that a weakness of the European system becomes apparent. Many technology-driven companies developing solutions to security-relevant problems find only limited suitable conditions in Europe. Two factors are decisive: access to initial contracts and direct contact with users. Without these, innovation stalls at an early stage.

Long procurement cycles and complex procedures make it difficult for young companies to build viable business models. Other innovation ecosystems address this proactively: with rapid pilot projects, early contracting opportunities, and clear pathways to end users. The consequence: talent and companies increasingly gravitate toward locations that enable faster implementation. Europe is not losing this competition for lack of ideas, but because of structural conditions.

Systemic Filter Effects

These conditions act as a filter. Complexity, opacity, and lengthy decision-making processes favor established players, while new companies frequently fail at market entry barriers. The system thus structurally selects against speed. The very players who could contribute to adaptability through new approaches and short development cycles often find no access. At the same time, existing processes reinforce the dominance of established structures. The result is an innovation system that does not fully exploit its own potential.

From Intent to Operational Impact

Numerous initiatives show that the need for innovation has been recognized. Strategy papers, programs, and organizational units are in place. What matters, however, is operational implementation. Effective innovation requires concrete mechanisms: translating real-world needs into actionable problem statements, rapidly deploying solutions in the field, and systematically scaling successful approaches.

This is precisely the unique role of the Bundeswehr’s Cyber Innovation Hub. As a “Bundeswehr startup,” its mission is to identify and implement unconventional solutions for the troops. The approach is deliberately operational: close to the user, iterative, results-oriented. The focus is not on developing abstract concepts but on concretely improving capabilities in the field. The Hub serves as a bridge between technological innovation and military application — addressing exactly the interface where traditional systems reach their limits.

Time as a Strategic Factor

Modern warfare is increasingly defined by speed. The ability to learn, adapt, and implement quickly is becoming a decisive competitive advantage. Time is thus evolving into a strategic resource. Innovation capability in this context means not only recognizing technological developments but translating them into operational impact — under real-world conditions and within short timeframes.

New players have a central role to play here. They bring speed, new ways of thinking, and technological dynamism into a system that has traditionally been designed for stability.

Conclusion

The transformation of defense is well underway. It concerns not only technologies but also structures, processes, and mindsets. For Europe, this presents a clear challenge: to create an innovation ecosystem that enables speed without sacrificing stability. One that integrates new players without neglecting existing strengths. And one that turns ideas into impact — fast. Modern warfare is not decided on the battlefield alone, but in the capacity to adapt. Or to put it more pointedly: new players are not a trend. They are a strategic factor.

Der Beitrag Why New Players Will Decide Europe’s Security erschien zuerst auf Atlantik-Brücke e.V..

By Dan Mullaney

From one perspective, “Liberation Day” (April 4, 2025), when the Trump administration imposed tariff levels not seen for 90 years – was the day the dam finally burst from long pent-up unaddressed US trade concerns.  The international trading rules and system had proven rigid and inflexible in the face of consistent, long-standing and mounting US complaints about trading partners’ tariff and non-tariff barriers and about the non-market economy tilt to the trade playing field.  As the dam burst, the current administration called a halt to the low and non-discriminatory “MFN” tariffs it had applied since the General Agreement on Tariffs and Trade in 1947 – tariff obligations that the US believed had taken away US leverage to negotiate — and unilaterally decided to offset those barriers and uneven playing field with high tariffs.

[related] The multilateral system has not been erased:  both the international trading rules and the US objectives of eliminating trade barriers and addressing non-market economy policies and practices remain.  If there is a desire to re-establish international trading rules, and if that system is to include the United States, then it may be important to make those trading rules function better to address legitimate US concerns.  The key can be found in the many provisions of the US-EU framework agreement that do not address tariffs, as well as the bilateral agreements with other trading partners that followed, which elaborated on the issues and concerns.

The US-EU Agreement lays out numerous obligations to address unnecessary regulatory barriers to trade and investment, both with respect to particular sectors and regulations and more generally – for instance, committing to enhanced cooperation to develop common standards for the transatlantic marketplace and to facilitate product testing.  It addresses the reduction of non-tariff barriers to food and agricultural products, unjustified digital trade barriers, and the enforcement of internationally recognized labor rights. It also includes provisions on cooperation vis-à-vis non-market economy policies and practices and supply chains, among many other provisions.

These are long-standing US objectives, and ones that the EU generally shares, at least in theory, but which have not been achieved despite years and sometimes decades of effort.

Other US bilateral agreements in 2025 are also relevant and revealing

Switzerland’s agreement provides for the application of the WTO Decision of the Technical Barriers to Trade Committee on Principles for the Development of International Standards, Guides and Recommendations (2000).  This decision recognizes that international standards (which give rise to a presumption of conformity with WTO international trade obligations) are the result of an open and consensus-based process, not limited to particular standards development organizations.  These include standards on which US standards and regulations are based, but which the EU does not recognize as international.  This puts US products at a disadvantage in the EU. Notably, the US-EU agreement does not contain this provision, suggesting that removing this barrier is at best a work in progress.

Also of concern, despite the commitment in the bilateral agreement to address unjustified digital trade barriers, are the numerous assurances from various EU officials that discussions with the US on the Digital Markets Act or the Digital Services Act are off the table because they would interfere with the EU’s “regulatory sovereignty.”  The WTO Agreement contains requirements that Members notify measures that impact trade, allow Members to comment on those measures and take those comments into account.  See, e.g., Article 2.9 of the WTO Agreement on Technical Barriers to Trade.  This includes how those measures are enforced.  Far from an assault on “regulatory sovereignty,” this is the very process by which the WTO avoids conflict and helps remove unnecessary trade barriers. Ideally, concerns about the DMA and the DSA and other digital measures would be the subject of bilateral discussions, not insulated from them on “sovereignty” grounds.

Further, both the Malaysian and the Cambodian Agreements contain provisions that protect the ability of US agricultural producers to use common food and agricultural terms in those markets.  They also require transparency, fairness, and rigor in the protection of “geographical indications” (GIs), like “Parmigiano Reggiano,” for food products whose quality, reputation, or other characteristic is attributable to its geographic origin.

“The EU might tout that the recently agreed EU-Mercosur agreement will stop the sale in Brazil of non-European parmesan”

These provisions are there because the EU systematically presses its trading partners to stop anyone from using terms that even “evoke” any one of hundreds of food names that the EU unilaterally considers to be its GIs.  That is, beyond securing access for its products in its trading partners, the EU actively prevents other countries, like the United States, from shipping its products under names that are recognized as common names outside of Europe.  The EU might tout that the recently agreed EU-Mercosur agreement will stop the sale in Brazil of non-European parmesan;  it’s less clear whether that would be a welcome development for this Administration.

Nor is this approach an anomaly.  The EU’s agreement with the UK calls for “dynamic alignment” with the EU on food-related sanitary and phytosanitary (SPS) measures.  This means that not only is the EU securing access for its products in the UK (and vice versa), it is also actively exporting its own agricultural trade barriers to the UK, blocking US access to the UK market.  Other EU agreements do the same, including with respect to industrial product regulations.

Many in the EU over the years have heralded the “Brussels Effect,” under which, because of its market power and regulation-forward approach, Brussels asserts itself as the standard setter for the world.  Brussels has been, effectively and proudly, creating global rules, with – as suggested by the EU approach to the DSA and the DMA — little or no input from trading partners.

“It is fair and perhaps wise to consider whether non-EU trading partners like the United States are as thrilled at that prospect as the EU has been”

The United States and the EU have been working for decades to find a way to address these non-tariff barriers to bilateral trade, including their spill-over impacts on joint third country markets, and to coordinate on non-market policies and practices.  Those efforts included a huge multi-year effort to negotiate a comprehensive agreement, the Transatlantic Trade and Investment Partnership (TTIP), that would have addressed virtually all of these issue.  The efforts also included follow-on initiatives over two administrations – Trump 1 and Biden — to address these issues on a narrower basis, after the EU concluded that it would not move forward on TTIP.

Those efforts failed, in no small part due to rigidities in the institutions and inflexible and narrow interpretation of international rules.  The failure of the General Arrangement on Steel and Aluminum negotiations – which should have resulted in an agreement to incentivize bilateral trade in sustainable and market economy steel — is a case in point. These efforts also failed from a lack of any sense of urgency, the belief that the old and inflexible ways would prove strong enough to prevail against the mounting new challenges and were not at risk.

Now that it is clear that this rigidity is a weakness, not a strength, and that the situation is truly urgent, it is time to revisit those rules and approaches and find a path forward.

The same applies to the World Trade Organization as an institution.  The US communication on WTO reform [WT/GC/W/984], recently circulated in the WTO General Council on December 15, 2025, advocates strongly for numerous reforms aimed at making the institution more sustainable and relevant.  Space limits do not permit a full discussion here, but WTO Members should pay close attention to it.

Conclusion

The agreed rules of the multilateral system have for decades been a source of strength for both the United States and its allies.  But to be sustainable, the rules need to continue delivering benefits to their participants, even as circumstances change.  That a major participant believes that the system has not done so is a fundamental problem that must be addressed if there is any hope of restoring a system of multilateral rules and alliances.  Or at least one that includes the United States.  To be clear, the United States is almost certainly weakening itself by alienating allies and pulling away from a multilateral system that it helped create.  But the US administration apparently believes that staying in a rigid system that did not deliver needed outcomes was weakening it more, and acted accordingly.

The path to re-establishing a multilateral system of rules that includes the United States is to re-examine where the current rules have fallen short, at least from the US perspective, and take action to address the shortcomings as appropriate.  The immediate vehicle to do so is to examine closely the set of bilateral framework agreements reached in 2025, which offer a clear roadmap for what should be done, and to use those to negotiate rules and outcomes that address the current challenges.

About the author:

L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center. Most recently, he served as assistant US trade representative (AUSTR) for Europe and the Middle East in the Office of the United States Trade Representative (USTR) from 2010 to 2023. Before assuming the post of AUSTR, he served as senior trade representative in the US Mission to the European Union in Brussels.

Der Beitrag US tariffs: It’s time to find a path forward erschien zuerst auf Atlantik-Brücke e.V..

In handling technologies and digital products, a dual strategy is needed to prepare for the future: We must strengthen the European market and domestic digital industry while adapting or embedding non-European products as necessary—aiming to use them securely and autonomously. This is only possible through close cooperation among the state, economy, science, and society.

By Claudia Plattner and Florian Seiller

Cloud computing, artificial intelligence (AI), quantum technologies, and mobile standards 5G/6G are key technologies and essential drivers of digitalization. They are transforming our world at tremendous speed, enabling unprecedented innovation for state, economy, science, and society, thus forming the basis of our prosperity and competitiveness. They are indispensable to our economy and increasingly permeate everyday life, from smartphones, tablets, wearables, electric vehicles, smart homes, social media presence, to cloud storage of personal data. Yet we are only at the beginning of profound developments: smart factories, smart cities, eGovernment, automated and connected mobility, eHealth, and New Space may soon become reality. The 2030s might usher in the next megatrend: quantum technologies promising leaps in computing power, communication, sensing, and simulation. Moreover, the number of connected devices is expected to surge to over 39 billion globally by 2033—more than four devices per person.

The cyber threat landscape

To successfully shape digitalization, massive effort and acceleration are required in state modernization, research, market transfer, legislation, and standards, especially if we want to compete in the digital top league and lead in future technologies. Current geopolitical developments confronting the West sharpen our awareness of the inseparability of digitalization and security and the necessity of addressing both jointly as two sides of the same coin.

[related] Particularly in cyberspace, what we call cyber aggression is felt profoundly. It is becoming a central battlefield for hybrid attacks (cyber conflict), a hotspot for criminals (cybercrime), and a sphere of technological dependencies (cyber dominance). Digital espionage, sabotage, disinformation, and propaganda have massively intensified over years, executable from almost anywhere in protected environments far from targets. Attribution is difficult as actors easily mask identities online. The damage caused—both virtual and physical—can be significant. For instance, cyberattacks on a European airport service provider in September 2025 severely disrupted air traffic. Or recall wind turbine disruption due to a satellite network attack in the context of the Ukraine war (2022). Persistent ransomware attacks targeting municipalities or their IT service providers disrupt or paralyze administration. Not only critical infrastructures but also democratic institutions—parliaments, parties, politicians, ministries, authorities, foundations, think tanks, and NGOs—face continuous digital fire aimed at shaking trust in state protection and democracy. A particularly insidious tactic is leaking stolen or manipulated data to discredit victims. Elections, a democracy’s core element, have also been targeted by foreign actors—with Germany’s vigilance keeping substantial success at bay. Many such attacks originate from state or state-affiliated actors such as intelligence services or APT groups with significant financial, technological, and personnel resources.

“Digitalization and security are inextricably linked. It is essential to think of both together.”

Cybercriminals operate sprawling, specialized ecosystems making substantial profits, especially via ransomware. Daily, around 300,000 malware variants appear. Boundaries between cyber conflict and cybercrime are increasingly blurred. The damages from cyberattacks to the German economy are immense: estimates for 2025 are about €202.4 billion, nearly €23 billion more than last year. For comparison, the 2025 federal budget is around €502.5 billion. IT outages from technical problems can also cause massive losses, such as the billions lost in 2024 due to a faulty update of Crowdstrike Falcon security software.

Analogously, Germany experiences continuous espionage and sabotage on land, water, and air, such as drone overflights, arson attacks, airspace provocations, or shadow fleets. Chancellor Friedrich Merz summarized this starkly: “We are not at war, but we are no longer living in peace” (Schwarz Ecosystem Summit, 26.09.2025).

Threat trends in cyberspace exemplified by artificial intelligence

Technological advances significantly shape security and defense policies. Dual-use technology AI is especially powerful, transforming social media, work, research, entertainment, and medicine. However, new technologies can also be misused. Foreign powers, criminals, and politically motivated hackers use innovative technologies to bypass IT defenses and increase digital offensive power. Already, attackers use AI-based methods on IT systems and infrastructure. AI-assisted attack tools speed vulnerability detection and exploitation, evade defenses, deploy malware via tailored social engineering (e.g., almost perfectly personalized phishing emails), or create malicious code—all without deep technical know-how. The darknet offers wide “shopping” options payable in cryptocurrency. AI might even support ransomware payments in cryptocurrency. The German Federal Office for Information Security (BSI) strongly advises against ransom payment. AI also amplifies Distributed Denial-of-Service (DDoS) attacks which temporarily disable web servers via overload. Particularly worrying is generative AI enabling automated attacks.

AI is heavily used for creating deepfakes and spreading disinformation, especially around elections, political campaigns, or to damage reputations. Expert knowledge is not always necessary—faces, voices, texts, and photos can be convincingly faked and misused criminally or politically. Experts increasingly struggle to distinguish real from fake due to rapid AI progress. Transparency is key, involving detection and digital “watermarks” to reliably verify content and provenance and identify AI-generated material. Authenticity confirmation from senders is needed—for example, a chancellor’s video should bear the federal chancellor’s office’s signature, while the Vatican would unlikely sign a photo of the pope in a Gucci coat.

Manipulation risk also comes from tampering AI systems by inputting distorted data to extract sensitive information or manipulate IT systems. In sum: AI models, especially large language models (LLMs), make future attacks faster, cheaper, and accessible to less technical hackers. AI’s military significance is evident in the Russian aggression on Ukraine. Autonomous AI hacking tools that independently compromise IT infrastructures do not yet exist, but LLM-based agents automating parts of attacks are deployed by foreign actors. The future will see attacks involving AI and against AI, cloud infrastructures, autonomous systems, or cryptography (e.g., quantum computing). We face a permanent and accelerating race between attackers and defenders.

The good news: new technologies do not only pose uncertainties but also many new opportunities—also for IT security. AI can help detect cyber threats and vulnerabilities faster (prevention), detect anomalies in data traffic (detection), intelligently analyze huge data sets, and automate defensive measures (response).

At the National IT Situation Centre, the operational cyber defense core at BSI, AI is already in use. However, only one in ten companies currently uses AI for cyber defense, so there is significant room for growth. Saarbrücken, a real AI hotspot, houses BSI’s AI expertise, intensively addressing AI and security questions, including digital consumer protection. In summer 2025, BSI published a checklist for AI systems in finance to systematically assess security, transparency, traceability, and fairness.

Technological dependencies exemplified by AI

Europeans’ vulnerabilities stem not only from direct attacks with new technologies but also from longstanding technological dependencies—digital products, quantum computing, 5G components, hardware, clouds, semiconductors. This is noticeable in administration, economy, and research. Surveys show that dependencies on the USA and China are perceived as largest in Germany. International crises and geopolitical tensions—sometimes fought with tariff and trade policy instruments, causing global trade conflicts—directly impact supply chains and can lead to influence via digital product manufacturers accessing data and services. Examples include solar inverter or router manufacturers from states where official bodies exert extensive control and manufacturers are obliged to full cooperation. Sabotage risks, such as in conflict scenarios, are also present. Such influence possibilities (cyber dominance) risk supply security, economy, and general security.

“The USA and China have significant market power.”

In AI, besides manufacturer access, market concentration causes technological dependency. The USA and China dominate, controlling availability of advanced generative AI models and necessary cloud infrastructures. Powerful AI models are usually licensed restrictively or cloud-hosted. Few large US and Chinese firms dominate training and hosting. Hardware is often overlooked: powerful AI systems demand specific, high-performance chips (GPUs, dedicated AI chips) developed and produced by few global companies in specific regions. This creates tangible supply risks and uncertainties. Additionally, dependency on quality training data with unverifiable validity exists.

Measures to strengthen digital sovereignty

As Germany’s cybersecurity authority, BSI believes states must ensure digital key technologies are available and securely usable to successfully and safely advance digitalization, mitigate risks, and reduce dependencies—especially amid hybrid threats and geopolitical rivalries. Our view: a dual strategy is needed:

First, strengthen the European market and domestic digital industry and accelerate digital sovereignty. Large foreign Big Tech companies still have significant lead in some areas; a full and sudden switch to national and European digital solutions is currently impossible. Since alternatives to foreign suppliers in AI are currently limited, European AI promotion must be intensified. Cybersecurity must be considered from the start (security by design).

Fortunately, numerous promising national and European approaches, initiatives, and products now exist in cloud and AI. Germany and Europe must catch up. We must invest more in German and European programs and better foster market readiness of domestic developers and manufacturers to produce internationally competitive products. Often, the hurdle is not fundamental research but market entry. This applies to cybersecurity products as well. Building a cyber market concretely benefits our cybersecurity and is a pillar of BSI’s strategy toward a cyber nation.

“We must invest more strongly in German and European programs.”

Second, adapt or embed international products technically as needed for secure and autonomous use and reliable prevention of undesired data leaks. European norms, standards, and security requirements must guide manufacturers and providers. Core is implementing technical control layers in products and services to better secure technologies and reduce dependencies. Yet extensive research and development effort is required. Securing products also requires close collaboration with manufacturers and open source communities nationally, across Europe, and internationally—practiced by BSI already.

The more trustworthy products available, the more sovereign decisions and secure digitalization become. It is about assessing and mastering technologies. Without this ability, we cannot master digitalization or cybersecurity. Assessing security properties and deriving requirements for products and services is a core BSI task. Close exchange with international partners, especially transatlantic, is indispensable.

This is why we also value dialogue at Atlantik-Brücke: it provides a forum for exchange among state, economic, and societal representatives on both sides of the Atlantic, strengthens mutual trust, and brings the transatlantic value community to life amid massive security threats. We look forward to continued exchange and jointly shaping cybersecurity in the future!

About the authors: Claudia Plattner is President of the Federal Office for Information Security (BSI), Dr. Florian Seiller works in Department K24 – Strategies and New Approaches to Information Security (BSI).

[Disclaimer: This text was originally written in German. The English translation was produced with the help of AI.]

Der Beitrag “Achieving digital sovereignty faster” erschien zuerst auf Atlantik-Brücke e.V..

By Florian Hahn

The United States remains our most important ally and partner outside Europe. This is especially true with regard to global challenges and numerous conflicts, foremost among them the Russian war of aggression against Ukraine and the situation in the Middle East, and in particular for safeguarding our security, our freedom, and our prosperity. Despite all tensions and contradictions, the transatlantic relationship is a pillar of the federal government’s foreign policy, and the transatlantic alliance is the guarantor of our security. This remains true regardless of sometimes critical perceptions in the public sphere – for example, following the speech by US Vice President J. D. Vance at the Munich Security Conference 2025, concerning US trade policy and discussions about the future orientation of the European security architecture.

Through intensive diplomatic visits, since taking office, the federal government has underpinned this with not just words but deeds, including toward the USA. This success is evident in the good contacts between the Federal Chancellor and Foreign Minister with their US counterparts. Together with the US government and allies in NATO, we worked towards the Hague summit and led it to success as an alliance of 32 allies, with a clear commitment to continued collective defense and Article 5, as well as agreement on significantly increased investments in our deterrence and defense, which are crucial for Euro-Atlantic security—our security as the Federal Republic of Germany—given the long-term threat posed by Russia.

Security

[related] The Russian airspace violations in NATO territory this September—whether by drones over Poland and Romania or fighter jets over Estonia—show us how tense the current situation is. In this critical situation, the importance of the transatlantic alliance—the most important and successful defense alliance ever—cannot be overstated. This is particularly true for Germany: about 37,000 American soldiers are stationed here, with key military facilities and infrastructure of the US armed forces located here. It is all the more important that we—together with our allies and European partners—do more for our own security and take responsibility.
The federal government has taken a decisive step with the reform of the debt brake to invest in our own defense capabilities. Like our NATO allies, by 2035 we will spend 5 percent of GDP—3.5 percent for defense expenditures and 1.5 percent for security- and defense-related tasks. At the European level, we have established an instrument that supports European member states in investing in their defense industry and thus their defense capabilities. Both are successes of determined German diplomacy that create new cooperation opportunities—including with the USA. This determination of the federal government to invest more in its own and European security and to strengthen the European pillar in NATO is also positively recognized by the US government.
Russia’s war of aggression in Ukraine, its military build-up, and revisionist goals beyond Ukraine represent the greatest threat to our security. Despite mediation efforts by the US president, Putin shows no serious willingness to negotiate. A ceasefire or an end to the war is not in sight. It is clear to us: we cannot do without the USA. Therefore, a determined and sustainable engagement by the USA—whether through supporting Ukraine with US weapons systems and sharing intelligence, or through coordinating sanctions and other pressure measures within the G7—is an even more important signal to Russia. At the same time, we Europeans must, within our means, do more to support Ukraine. Since 2022, Germany has already provided or committed bilateral military support amounting to 40 billion euros for the coming years. By supporting the financing of US arms deliveries through a newly established NATO mechanism of up to 500 million euros and the Chancellor’s proposals for the legally secure use of immobilized Russian assets to support Ukraine, we are going a step further. We call on our European EU partners and NATO allies to follow our example.

Freedom

The USA, through their landmark decisions after World War II and their support for German reunification, remain a guarantee of security, freedom, and prosperity in Germany and Europe. Without the courageous decisions of the then US government, there would neither be a reunified, democratic, and economically strong Germany nor a free Europe. For this, we remain very grateful to the USA.
However, this gratitude does not mean that we would adopt every critical statement about freedom of expression and democracy in Europe, not even those from some representatives of the current administration. On the contrary: the values that make Europe strong and the liberal-democratic basic order of Germany are the cornerstones of our freedom. Freedom of expression and democracy are highly valued in Germany and Europe and are preserved and defended through our rule of law.

Prosperity

The numbers are clear: The USA are the most important destination for German exports outside the EU. The USA are the largest non-European investor in Germany. Germany, in turn, is the third-largest investor in the USA. German subsidiaries currently provide about 870,000 jobs in the USA, US subsidiaries in Germany about 640,000, underpinning the importance of the transatlantic economic area. Such close economic interconnections have developed over decades and cannot be substituted in the short term. It is also not in mutual interest to dissolve these closely intertwined supply chains—partly in critical sectors—and thus weaken the resilience of the transatlantic market in the face of major geopolitical and geoeconomic challenges.

“The values that make Europe strong are the cornerstones of our freedom.”

Looking ahead, transatlantic cooperation holds immense potential: together, Europe and the USA account for 43 percent of global GDP and nearly 30 percent of global trade in goods and services. European research institutions, universities, and companies are innovation engines for the critical technologies of tomorrow. To fully exploit this potential, it will be important to strengthen our competitiveness and innovative strength in Europe as well—and thus to meet the USA on equal footing.

From the outset, the federal government has supported the removal of mutual barriers. The trade agreement achieved between the USA and the EU should only be an intermediate step, as its asymmetry poses great challenges to our companies and increases the risk of fragmentation of free trade. However, it creates short-term security and predictability for German and European companies and has prevented an escalation of the trade conflict with potentially serious consequences for the European economy. Therefore, the federal government supports the European Commission in negotiations with the USA along our economic policy interests. At the same time, the federal government advocates European unity among member states and promotes further diversification of EU trade relations.

New lessons, new fields of action

Looking at developments in all three fields—security, freedom, prosperity—since the start of the US government and the federal government under Chancellor Friedrich Merz, it becomes clear: current developments in transatlantic relations also contain an important lesson for German foreign policy. Germany must “relearn” self-confident, interest-oriented targeted cooperation with states in the sense of the triad of security, freedom, and prosperity. This applies especially or even particularly when these states do not or no longer fully share our values.

What does that mean? In the case of the USA as a central partner and ally, opportunities and challenges present themselves equally. It is clear that we must preserve the long-grown shared values and interests and build them up where consensus is possible. At the same time, in the transatlantic relationship, alongside core topics of security and economy, we must also define new fields of action along our interests to not only secure this cooperation but also to bring it into a new era.

New target groups

Relations with the USA are changing—especially with regard to our populations: historically, fewer and fewer people in the USA and Germany are socialized transatlantically. To keep relations stable in the USA, it must also be about strengthening them in the middle of our respective societies. Therefore, we need to take care to reach the next generation of Transatlanticists. We want Germany to be positively perceived in all its dimensions in the USA. This means reaching as many diverse population groups as possible. In recent years, the federal government and its predecessors have invested a lot: we have intensified exchanges of our cultural mediators, alumni, and honorary consuls in the USA, strengthened cooperation with subnational partners such as state parliaments, mayors, and other officials in the states, and brought new target groups to Germany through customized programs.

We do not want to rest on achievements and will intensify our efforts. This includes, among others, sports diplomacy at upcoming major events like the 2026 FIFA World Cup and the 2028 Olympic Games in Los Angeles. It includes the Goethe-Institut opening new locations away from the coasts in Houston and St. Louis. It also includes winning many people in the USA who have contact points with Germany—for example alumni of exchange and scholarship programs or veterans who served in Germany—as ambassadors for Germany. Many of them are willing to actively commit to the German-American partnership.

Future technologies

Whether artificial intelligence, quantum computing, or space travel: when it comes to the critical technologies of the future, European researchers and companies are always involved. Even if we cannot always keep up with the entrepreneurial speed in the USA and the financing opportunities there, cooperation in sensitive technology areas is only possible among like-minded states for reasons of technical and national sovereignty. This is why there is great potential for deepened cooperation between Germany/Europe and the USA. We should focus on space travel; German space start-ups are already important suppliers for US giants SpaceX and Blue Origin, and ESA is already an important partner for NASA. We need to build on and offer proposals here since cooperation with the USA can also be a driver for our own economy and innovation strength. For us, this also means continuing to invest in our own innovative capacity and research security to be an attractive and trustworthy partner.

New partnerships

Whether in the Indo-Pacific or Latin America: the federal government has made it its task to establish new partnerships worldwide and deepen existing ones. This includes our commitment to the timely conclusion of EU free trade agreements with MERCOSUR and Indonesia, support for EU negotiations for free trade agreements with India, Malaysia, the Philippines, and Thailand, as well as intensifying our relations with Canada. This strengthens the resilience of the European economy, diversifies risks, and creates new starting points for cooperation with the USA and transatlantic relations.

“We must continue to invest in our own innovation capabilities and research security.”

This also applies particularly to Latin America: The US government aims to focus more on Latin America in foreign policy. This involves—especially in competition with China—the question of who will set narratives and exert influence in South America in the future. Germany has a close network on the continent and is seen as a credible partner in many countries. That is why we should coordinate our commitment with the USA and act jointly wherever possible. Especially in connectivity, we can offer alternatives to the Belt and Road Initiative with the EU’s Global Gateway and deepen economic ties. We can also contribute importantly in crisis contexts. For example, Germany pledged another five million euros at the UN General Assembly to support international efforts to restore peace and security in Haiti. This sent a signal of our engagement for the region that was closely observed in Latin America and the USA.

Outlook

Our relations with the USA have rarely been straightforward since the end of World War II but have always been of central importance to the Federal Republic of Germany. Even more than a year after Donald Trump’s election as the 47th US president, they will continue to intensively occupy German and European politics. It is therefore all the more important to continue investing beyond everyday business and beyond the major lines of our time in the future of these relations, in the USA and beyond.

About the author: Florian Hahn (CSU) is Parliamentary State Secretary at the Federal Foreign Office.

[Disclaimer: This text was originally written in German. The English translation was produced with the help of AI.]

Der Beitrag “Reaching the next generation of transatlanticists” erschien zuerst auf Atlantik-Brücke e.V..

This year, Brussels—at the heart of European policy-making—hosted the 4th Transatlantic Forum on Geoeconomics on 30 September 2025. The discussions centred on transatlantic priorities, framed by escalating geopolitical tensions and growing economic volatility. The agenda drew heavily on high-level exchanges, most notably with US Ambassador to NATO Matthew Whitaker and EU Trade Commissioner Maroš Šefčovič, who brought both candor and nuance to their respective fields.

“America will protect every inch of the Alliance’s territory.”

Ambassador Whitaker sent a clear signal of enduring American commitment to NATO’s collective defense, insisting that “every inch” of the Alliance’s territory will be protected. He described how sustained diplomatic engagement had moved President Trump to a position of robust support for Ukraine’s sovereignty, emphasizing that a united front is needed to impose real costs on Moscow. Recent Russian drone incursions into NATO airspace—over Poland and the Baltic countries—were cited as stark reminders of persistent threats, but also as proof of the Alliance’s responsive capabilities and deterrence posture. Whitaker voiced frustration, however, that some European allies still “drag their feet” on defense spending, warning that failing to reach the newly established 5 percent GDP benchmark could undermine both credibility and deterrence. For Whitaker, a secure Alliance is inseparable from balanced burden-sharing—an aspiration now hard-wired into the “Hague defense commitment” but requiring vigilance to ensure meaningful year-over-year increases.

“Fostering a climate for innovation will be key to both economic and security resilience.”

On the European side, Commissioner Šefčovič reflected on a fundamental transformation: Europe, he argued, began as a peace project but is now compelled to reassess its security and defense posture amid rapidly shifting geopolitical realities. He stressed the importance of treating the US as a strategic partner—not only by stepping up defense investment, but also by making Europe’s own defense sector more attractive to investors. Echoing Whitaker, Šefčovič acknowledged that without sustained economic growth, it is simply not possible for any government to invest 5 percent of GDP in defense—and that fostering a climate for innovation will be key to both economic and security resilience.

Some panels focused on trade and tariffs. The participants agreed that the current moment marks the beginning of a “new chapter in trade,” characterized by ongoing uncertainty and drastic shifts in global goods traffic. New US tariffs would force Europe to rethink its supply chains. In addition, Europe would have to carefully consider how much of its steel industry it would allow to migrate to China. Anahita Thoms, Partner, Head of Germany’s International Trade Practice, Baker McKenzie, made it clear that “tariffs hurt, but uncertainty destroys” and that a return to the old global trade order was not to be expected. Instead, Europe must diversify its trade relations, for example through new agreements with Mercosur, while at the same time stabilizing and deepening transatlantic economic relations, the panelists emphasized.

„Deep partisan devide is a real internal threat of the position of the US dollar.“

Another thread running through the Transatlantic Forum was the question of the US dollar’s global standing. Both American and European speakers noted that the dollar’s supremacy now faces internal threats from the ideological split in American politics. ‘We don’t really know when the decline of the US dollar started,’ said Selesha Mohsin, Bloomberg’s senior Washington correspondent. „Deep partisan devide is a real internal threat of the position of the US dollar.“ This has sparked a broader European reevaluation of payment systems and a search for greater financial sovereignty, with calls to create new platforms less exposed to external shocks.

„Europe is the only world region where the demand for energy has declined which is a sign of deindustrialization.“

In the critical field of energy, the Transatlantic Forum stressed that Europe is unique as the only major region experiencing declining demand. Andrew Puzder, the new US ambassador to the European Union, said: „Europe is the only world region where the demand for energy has declined which is a sign of deindustrialization.“ This trend, conference voices emphasized, must be confronted if Europe is to avoid long-term erosion of its industrial base and safeguard energy security.

„The AI race is decided by capital and talent.”

Finally, the discussion turned to artificial intelligence and digital competitiveness. Europe’s lag in generative AI adoption was framed as both a challenge and a call to action. „Only 37 percent of German companies use generative AI“, said Michael Hüther, Director & Member of the Presidium, German Economic Institute (IW). „AI is important for Germany to come back to the mid range of economic groth“, he stressed. And Jens Wiese, managing partner at Leitmotif, added: „The AI race is decided by capital and talent. European companies would be illed advised to sacrifice the transatlantic ties by trying to search more AI opportunities in China“.

The speakers at the Transatlantic Forum agreed that closing this gap will require pragmatic regulation, capital investment, and—most importantly—retaining the strength of the transatlantic relationship rather than seeking shortcuts in collaboration with other players. For now, only the US possesses the scale and dynamism needed to lead in AI, highlighting the limits of Europe’s fragmented financial markets.

Throughout the 4th Transatlantic Forum, the message was clear: the challenges of security, economic competitiveness, innovation, and resilience can only be met through renewed transatlantic solidarity—anchored in both shared values and real investment on both sides of the Atlantic.

Briefings on the Conference Topics

The following policy briefs offer a deep dive into the conference topics:

“Points of Vulnerability in the Battery Cell Industry” – Kai Müller, Chief Financial Officer of PowerCo SE, and Sören Pippart, Senior Expert for Public Affairs at PowerCo SE, outline Germany’s weaknesses and possible courses of action in the battery sector.

“Waiting for the Big Bang: Executing the European Defense Build-Up in Germany” – Robin Fehrenbach, Head of Analysis and Documentation at Atlantik-Brücke, Jakob Flemming, Senior Program and Research Manager at Atlantik-Brücke, and Julia Friedlander, CEO of Atlantik-Brücke, describe how Germany is attempting to become defense-ready in record time.

“The dollar in the fight for US primacy” – Martin Mühleisen, former official at the International Monetary Fund (IMF) and Nonresident Senior Fellow at the Atlantic Council’s GeoEconomics Center, analyzes how the US under President Trump uses economic policy as a tool to advance foreign policy priorities.

“How to dismantle a reserve currency” – Daniel McDowell, Nonresident Senior Fellow at the Atlantic Council’s GeoEconomics Center, reflects on whether the days of the dollar as a reserve currency are numbered and whether the euro is ready to take its place.

“The Road to Turnberry” – Elizabeth Baltzan, Senior Fellow at the Atlantic Council GeoEconomics Center and former advisor to the US Trade Representative, assesses the latest trade deal between the European Union and the United States.

“The summer of AI action plans” – Alisha Chhangani, Assistant Director at the Atlantic Council GeoEconomics Center, and Ananya Kuma, Deputy Director, Future of Money, at the Atlantic Council GeoEconomics Center, analyze the widening gap between the US, China, and Europe on artificial intelligence.

Watch a look back at the forum here:

Watch the full recording of the Transatlantic Forum here:

Watch here exclusive Video interviews with the Pannelists:

Der Beitrag Responding to Global Shifts erschien zuerst auf Atlantik-Brücke e.V..

As the US champions deregulation and private investment, the EU’s rule-bound approach and budget limits threaten to widen the transatlantic gap—just as competition with China intensifies. 

By Ananya Kumar and Alisha Chhangani

This summer, the European Union (EU), the United States, and China all laid out strategy documents on their respective approaches to artificial intelligence (AI) domestically and abroad.

As both the United States and European Union unveil ambitious AI strategies this summer, a paradox emerges: despite sharing broadly similar objectives—boosting domestic AI capabilities, maintaining technological leadership, and managing AI risks—the two allies find themselves increasingly at odds over how to achieve these goals. The divergence reflects fundamental differences in regulatory philosophy, economic structure, and geopolitical positioning that threaten to fragment what should be a unified Western approach to AI governance at a critical moment of competition with China.

[related] The Donald Trump administration’s “Winning the Race: America’s AI Action Plan” outlines a vision of AI as a decisive frontier of global economic and security competition. The first pillar— Accelerate AI Innovation— advocates for a deregulated, private-sector-led environment by reducing regulations, promoting open-source AI models, and fast-tracking AI deployment in industries such as healthcare, while tackling some questions about workforce transition. The second pillar—Build American AI Infrastructure— addresses energy capacity by upgrading the electric grid, restoring domestic semiconductor manufacturing, building secure data centers, and establishing cybersecurity measures including incident response capabilities. The third pillar—Lead in International Diplomacy and Security—seeks to counter Beijing’s growing influence in international governance bodies and export the full stack of US AI to allies and partners. The plan also identifies financial services as both an opportunity and a vulnerability. AI is viewed as a driver of financial innovation and efficiency, but also as a channel for risks including misinformation, cyber fraud, and systemic instability.

“Approaches from the United States and the EU are both likely to face issues regarding capital and financing of these action plans.”

The European Commission’s AI Continent Action Plan was unveiled in April 2025, and is part of a long series of reports and regulations undertaken by the EU to bolster its competitiveness in AI. It lays out a five-pronged plan to scale up computation models through new AI factories, innovation hubs, and pooled resources, improve access to and availability of high-quality data, accelerate application of AI through public services and industrial activities, enable the Draghi report’s ambition to “exceed the US in education” when it comes to training and retaining skilled talent, and further fortify the European single market for AI.

Both the approaches aim to buttress domestic adoption and application of AI—often through nudges from the state when it comes to exploring applications in public services, and encouragement for many kinds of commercial activities. China has come to a similar conclusion, with its continual emphasis on using local government action plans to diffuse AI into public service provisions, and all kinds of industrial activities through its “AI Plus” initiative. There are few references to China in the EU’s latest AI document, while Washington’s approach has both implicit and explicit connotations of a largely two-way race between itself and Beijing.

Approaches from the United States and the EU are both likely to face issues regarding capital and financing of these action plans. While US private-sector investments in AI are many-fold those in the EU and China, the scale and focus of spending make a big difference. In the United States, the Trump administration has put AI contracts front and center in its broader deregulation approach—recent quarters have seen dozens of venture capital rounds above $100 million, and large megadeals (one of about $40 billion in the first quarter of 2025 alone aside) are becoming more common. Major players like Microsoft have committed to $80 billion this year for AI-capable data centers, and overall US tech capital expenditure for AI and infrastructure is being projected in the hundreds of billions over the next few years.

Meanwhile, across the EU, fiscal rules constrain deficit and debt levels: member states are required to keep deficits below 3 percent of gross domestic product (GDP) (though some exceed this threshold) and debt below 60 percent. The EU’s budget amounts to about 1 percent of GDP, and key instruments such as the Recovery and Resilience Facility are set to expire in 2026—leaving a gap in large-scale funding. The EU is currently negotiating its next seven-year budget (2028–2034), which is expected to place strong emphasis on large-scale investments, including a proposed Competitiveness Fund. In China, while growth targets remain and fiscal policy is being kept “flexible,” debt burdens, weak investment returns in sectors such as property and manufacturing, and slowing external demand limit what Beijing can unilaterally spend without risking macroeconomic instability.

These differences mean that even when headline figures like “$500 billion investments” are floated, much of that tends to flow into private capital for infrastructure, cloud and chip production, startup rounds, and acquisitions. They are not distributed evenly or necessarily aimed at building strategic domestic capabilities. Europe and China risk being unable to match the pace of US capital expenditure, not only because of absolute capital constraints but because of institutional, regulatory, and macro-fiscal drags.

Challenges to US-EU alignment on AI

These structural spending imbalances are compounded by inconsistent US policy decisions that leave European partners scrambling to adapt. For example, Joe Biden administration’s AI diffusion rule in January 2025 left many countries in Europe with restrictions on importing advanced chips from the United States, and led to a call for maintaining a “secure transatlantic supply chain on AI technology and super computers, for the benefit of our companies and citizens on both sides of the Atlantic.” The Trump administration repealed this rule and, in its place, the EU committed to purchasing $40 billion of US-made chips as a part of its trade agreement with the United States.

This interaction lays bare the two tensions complicating the US-EU alignment on AI strategies. The first concerns the strategies’ time horizons and the enabling actions undertaken by each jurisdiction. The EU’s approach has been solidified with years of iterative public discussion amid the market transformation from AI—starting with the Draghi report, the AI Act and even Ursula von der Leyen’s European Commission presidency campaign. In contrast, the US AI strategy has seemed reactive and temperamental—shifting focuses between administrations on important issues such as risk and safety, open-source models, and export controls. Recent partnerships with the Gulf states and lifting of controls on NVIDIA’s H20 chips sale to China have also demonstrated a deal-making approach to AI, which is often at odds with the stated US strategy.

The EU has embraced binding rules such as the AI Act, in line with its broader tradition of digital regulation. By contrast, US administrations have favored light-touch, voluntary frameworks, and sectoral oversight rather than comprehensive law. This reflects a bipartisan reluctance to over-regulate the industry. This divergence in regulatory culture means that even when Washington and Brussels agree on broad goals, they often diverge on the instruments used to achieve them,

The second tension in the US and EU strategies concerns the EU’s own complicated motivations in the context of its present economic interdependence on the United States and China. This reliance is visible across the entire AI input stack. At the software level, European firms overwhelmingly depend on US-developed foundational models, cloud platforms, and AI tools provided by companies such as Microsoft, Google, and OpenAI, reflecting the absence of a globally competitive European alternative. In 2025, the United States produced about forty large foundation models, China around fifteen, and the EU only about three.

“Chinese companies dominate the refining of critical minerals such as rare earths and graphite, essential for chipmaking and AI datacenter equipment.”

At the infrastructure and cloud level, the “big three” US cloud hyperscalers are estimated to power about 70 percent of European digital services. At the hardware level, the EU remains structurally reliant on advanced semiconductors designed in the United States and fabricated in Asia, with Europe’s domestic semiconductor sector making up less than 10 percent of global production.

Supply chains for critical minerals and legacy chips further reinforce exposure to Chinese producers, which control a significant share of upstream inputs and mid-tier manufacturing. Chinese companies dominate the refining of critical minerals such as rare earths and graphite, essential for chipmaking and AI datacenter equipment. They are also leading suppliers of mid-range GPUs, networking hardware, and AI server components, which European firms may increasingly source to diversify away from US vendors. Chinese technology companies, including Baidu and Alibaba, are also emerging players in foundation model training and deployment, reinforcing Europe’s reliance on external providers. These dependencies complicate the EU’s sovereignty ambitions and its ability to balance relations with the United States.

Recognizing these vulnerabilities, the EU launched initiatives to expand domestic capacity, raising about €20 billion to build “AI gigafactories.” These factories would be capable of hosting large-scale compute infrastructure, with the aim of catching up to the US and China. While these projects signal a commitment to reduce dependency, they remain long-term efforts. Even as Europe invests in its own infrastructure, there is still high exposure to non-EU supply chains for the critical inputs into AI. The European Central Bank noted that about half of Euro area manufacturers sourcing critical inputs from China report being exposed to supply chain risk.

These two tensions—volatility in US policy actions and the gap between the EU’s ambitions of sovereignty and its reliance on US and China for critical inputs—will continue to play out over the next few years.

The financial services sector and AI action plans

For financial services in particular, AI adoption is accelerating—banks now flag AI as core to transformation. JPMorgan reports hundreds of production use cases across fraud, marketing, and risk in its shareholder communications, while Bank of America’s “Erica” virtual assistant has logged more than 2 billion client interactions—evidence that AI is reshaping front-, middle-, and back-office processes from customer service to underwriting to treasury operations. This brings opportunities including cost and error reduction, real-time risk sensing, and new AI-enabled products like cash flow intelligence for corporate treasurers.

“Financial services represent one of the highest-risk sectors for AI adoption, given the direct societal impact of errors or bias in lending, risk modeling, or compliance monitoring.”

But financial services also represent one of the highest-risk sectors for AI adoption, given the direct societal impact of errors or bias in lending, risk modeling, or compliance monitoring. The AI Index 2025 shows that measurable gains remain modest, with most firms reporting less than 10-percent cost savings or revenue growth below 10 percent. AI adoption for financial services also lags in key areas. Many institutions remain in pilot phases, data quality and legacy infrastructure limit deployment, and regulatory uncertainty combined with talent shortages slows uptake in high-risk applications such as credit scoring and underwriting.

Regulatory divergence sharpens these trade-offs: The United States leans on voluntary risk-management tooling (the National Institute of Standards and Technology – Artificial Intelligence Risk Management Framework) that gives firms latitude to innovate, whereas the EU’s binding AI Act and sectoral guidance from the European Securities and Markets Authority impose high-risk classifications and board-level accountability for AI in investment services—raising documentation, testing, and oversight burdens for cross-border finance.

Ultimately, the private sector and business in both jurisdictions need to adapt to these tensions and, in some cases, even begin to view them as productive in their journey of AI adoption and diffusion across various functions. What the AI action plans have done is provide a broad framework of AI strategy. But for financial services companies and the broader commercial sector, the devil is in the details, and will require closing the transatlantic gap in the regulatory approach to AI. This seems more difficult than it would have a year ago.

Ananya Kumar is the deputy director, Future of Money, at the Atlantic Council GeoEconomics Center.

Alisha Chhangani is an assistant director at the Atlantic Council GeoEconomics Center.

Check out our other policy briefs for the Transatlantic Forum on Geoeconomics:

„Points of Vulnerability in the Battery Cell Industry“ by Kai Müller, Chief Financial Officer at PowerCo SE. and Sören Pippart, Senior Expert for Public Affairs at PowerCo SE.

„The dollar in the fight for US primacy“ by Martin Mühleisen, former International Monetary Fund (IMF) official and nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

„Waiting for the Big Bang: Executing the European Defense Build-Up in Germany“ by Robin Fehrenbach, Director of Research and Documentation at Atlantik-Brücke, Jakob Flemming, Senior Program & Research Manager at Atlantik-Brücke and Julia Friedlander, CEO of Atlantik-Brücke

„How to dismantle a reserve currency“ by Daniel McDowell, nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

„The Road to Turnberry“ by Elizabeth Baltzan, Senior Fellow at the Atlantic Council GeoEconomics Center and former Senior Advisor to the US Trade Representative.

Der Beitrag The summer of AI Action Plans erschien zuerst auf Atlantik-Brücke e.V..

by Robin Fehrenbach, Jakob Flemming, and Julia Friedlander

Since Germany’s reunification, defense spending has been a taboo topic in the country. Russia’s war with Georgia and incursions into Ukraine in 2014 raised relatively few strategic concerns in Berlin, and it took until February 2022 to shake the system loose. From guns versus butter debates to the unwinding of spending orthodoxies and industrial transformations, the last several years have witnessed a small revolution in the national dialogue as well as in the broader economy. The country has begun building a military-industrial complex essentially from scratch and exploiting all means to finance it—including using the public purse, commercial banking, and private capital. Policymakers and industry leads must deliberate what will be financed nationally, in consortium or through European Union (EU) and NATO mechanisms. It is all new.

European institutions are also expanding their mandate. The European Commission appointed Lithuanian Andrius Kubilius as its first commissioner for defense in a bid to draw defense consolidation into the technocratic machine best known for streamlining trade and financial regulation across the bloc. In November 2024 at the Berlin Security Conference, then-Commissioner-Designate Kubilius called for a “Big Bang” approach in defense policy, which would entail “producing a clear Industry Output Plan, based on the analysis of capability gaps according to NATO evaluations and covered by European production of defence equipment where we have capability gaps, with a clear target date to fulfil this Plan around 2030.” [1]

The political will is there – and the private sector is ready to contribute

The June 2025 commitment of NATO Allies to spend 5 percent of gross domestic product (GDP) on security and defense until 2035 provides the new baseline and blueprint for European defense [2]: 3.5 percent is to be invested into weapon systems and ammunition, 1.5 percent into critical infrastructure. NATO Secretary General Mark Rutte articulated this shift after pre-summit consultations with President Donald Trump, but he already had the facts to back up his assertions to the US president [3]. Just weeks earlier, Germany had upended its constitutional debt brake for security and defense investments and created the Sondervermögen for infrastructure.

After years of circuitous debate, the presumed new chancellor, Friedrich Merz, invoked the outgoing German Bundestag mandate to relax the debt brake [4]. The move ultimately gained support across the centrist political spectrum, ensuring that both state-driven and external financing mechanisms would be used to reach NATO pledges. The drastic increases in defense spending remain broadly in line with fiscal principles, requiring what some would call an accounting trick, and others a compromise. Defense investments are now exempt from the constitutional debt brake and can total up to 1 percent of GDP [5]. Anything beyond 1 percent of GDP for defense investments requires credits in special funds, usually referred to as Sondervermögen. While on-budget expenditures and investments in security and defense depend on the incoming tax revenues of the German economy, discretionary spending is effectively freed from these constraints, imposing no specific limit on such extra funding. Defense spending has gone from a crawl to a sprint, overnight.

It is a sea change that the government will now rely on private funding to uphold its national security obligations.

Government stimulus tends to trigger private sector interest, which is poised to play a crucial role in scaling up defense-related resources, increasingly billed as a reliable, growing, and even socially responsible investment sector. Commercial and investment banks as well as private equity and venture capital firms are rapidly developing products for both institutional and private clients, reflecting broader awareness among decision-makers from the public and private sectors that capital is needed to meet defense spending goals. As Deutsche Bank Chief Executive Officer Christian Sewing put it, “we need to efficiently combine public funds with private capital to finance expansion. Banks and investors are ready for this – for example, Deutsche Bank’s corresponding loan portfolio amounts to a mid-double-digit billion-euro amount.” [6]

Two recent high-level events that the Atlantik-Brücke hosted in Berlin brought together stakeholders from the military and private sector to discuss how private capital can fund the German defense build-up, sending a clear signal that private investors are ready to channel capital into Germany’s defense capabilities. It is a sea change that the government will now rely on private funding to uphold its national security obligations.

Based on this assessment, the EU created a program, SAFE (Security Action for Europe), to provide €150 billion in long-maturity loans for procurement efforts and fund projects based on common procurement [10]. SAFE projects should involve “at least one Member State benefitting from SAFE and another Member State, as well as Ukraine and EEA-EFTA [European Economic Area-European Free Trade Association] countries,” but will also temporarily fund individual member states’ procurement in acute security crises. It remains to be seen whether SAFE can fulfill Commissioner Kubilius’ big promise from September 2025 to “unify our fragmented defence procurement.” [11] For the time being, nation-states and private capital will provide the lion’s share of required funding, largely due to the direct economic impulse defense spending gives to national economies and their flagship contractors.

Through defense, Germany’s economy can change in shape and scope

Increased investment in military systems will impact the overall industrial and economic landscape in Germany. In addition to defense allocations, the Sondervermögen also includes €500 billion for infrastructure and climate protection [12]. It has not escaped the governing parties that the security crisis in Europe provides an opportunity to ignite a long-needed growth stimulus for the German economy. Germany remains the third-largest economy in the world, but is poised to record a third consecutive year of zero or negative growth. This year most likely will not bring the turnaround: In the second quarter of 2025, Germany’s economy decreased by 0.3 percentage points compared with the first quarter [13]. All major economic institutes in the country as well as the International Monetary Fund predict hardly any economic growth for Germany in 2025 [14].

Germany’s defense industry will also play a crucial role in building Ukraine’s deterrence capabilities.

Germany’s economy has developed formidable strengths in the automotive, machine engineering, and chemical industries over the past few decades, leading to its export-oriented position in the global economy. This has changed significantly, especially over the past five years, as global competitors have improved their research and development in all kinds of industrial sectors, their labor force skills, and their knowledge. More robust supply chains and much lower energy costs have also contributed to the successes of foreign economies, mostly in the Indo-Pacific region and in South America.

Der Beitrag Waiting for the Big Bang: Executing the European Defense Build-Up in Germany erschien zuerst auf Atlantik-Brücke e.V..

Much has been said about the unequal terms of the US-EU trade deal reached in Turnberry, Scotland, in July. Two camps have emerged: those who see Europe as having prematurely capitulated to US coercion and those who see Europe as having had little choice.

By Elizabeth Baltzan

Any assessment of the outcome of the Turnberry negotiations—and, therefore, any assessment of where to go from here—hinges not on the negotiations themselves but on the amount of leverage the two parties brought to Turnberry. The European Union (EU) had less of it. Europeans have a goods export dependency on the United States that the United States does not have with any country, let alone those in Europe. This asymmetry is long-standing, an outcome of the post-war trade system that emerged after Bretton Woods. That system was grounded in a model of export-led growth. As the richest market and with the lone currency pegged to gold, the United States was the target designation for others’ exports, not least so that European countries could earn dollars to rebuild.

US negotiators of that era were comfortable with asymmetrical concessions because they believed the global economy as a whole would grow, aggregate demand would rise, and all trading nations could benefit from increased production. The United States did not undertake these commitments with the expectation that increased imports would come at the expense of US workers or producers. At some point, however, that is just what happened, contributing to the Nixon Shock of 1971. Part of Richard Nixon’s goal in allowing the dollar to float was to correct for overvaluation that had depressed US export competitiveness. The accession of China’s non-market economy to the World Trade Organization (WTO) in 2001 accelerated US deindustrialization and, along with it, the loss of jobs that had provided many blue-collar Americans with lifelong economic security. Today, this is known as the China Shock.

“The last three years have exposed all too well, exports are not the only area of asymmetrical European dependency.”

As the last three years have exposed all too well, exports are not the only area of asymmetrical European dependency. The EU has also relied on the United States for its security—another outgrowth of the post-war environment. The United States was not only the market of first and last resort, but Europe’s security guarantor. To be sure, this was not an altruistic undertaking. The United States sought to keep Europe democratic and market oriented, part of an overall effort to fend off the threat of communist encroachment.

European prosperity flourished. Today, more than half the Group of Seven (G7)—the club of rich countries—comprises European democracies as well as all three former Axis powers. Nevertheless, these dependencies persisted.

The China Shock, the financial crisis, and popular backlash

As the China Shock began to unfold in US communities, the 2008 financial crisis and resulting recession severely widened inequality and aggravated precarity in many of those same communities. The one-two punch of deindustrialization and the Great Recession sparked popular backlash against a global governance regime seen as serving the interests of elites at the expense of the middle and working classes. In retrospect, this backlash can be understood as the beginning of the end of the United States’ willingness to serve as the market of first and last resort.

[related]In 2013, academics began to document the China Shock, formally publishing the results of their work in 2016. These results showed that US imports from China had caused a significant loss of manufacturing jobs, concentrated in particular regions, with economic effects that lasted throughout workers’ lifetimes. The researchers also linked the China Shock to electoral outcomes. In 2015, the Chinese government adopted a Made in China 2025 industrial strategy that promised to transform China into a producer and innovator of cutting-edge goods. The combination of the China Shock and Made in China 2025 triggered a profound and rapid shift in US thinking. Policymakers who had supported the effort to create a global free market confronted the rise of a non-market economy that was dominating one critical industrial sector after another. Made in China 2025 sought to expand that dominance from steel, aluminum, and glass to advanced sectors such as electric vehicles, robotics, and aerospace. It was precisely to avoid that kind of dominance that the architects of Bretton Woods planned to embed antimonopoly rules in the global trading system in 1948.

The “free trade” paradigm breaks down

Made in China 2025 was inspired by Germany 4.0, Germany’s industrial strategy, and both were grounded in export-led growth. As early as the 1970s, the United States complained that Germany was promoting exports at the expense of domestic consumption.

In 1995, Europeans and Americans led the creation of an entirely new trade regime, yet this failed to address the long-standing transatlantic tension of Germany’s export orientation. Moreover, the tariff asymmetry dating back to the founding of the General Agreement on Tariffs and Trade (GATT) lingered; the US tariff cap was 3.4 percent, while Europe’s was 5 percent. While the United States sought to use the narrower tools of trade remedies (known as “trade defence” in Europe), the WTO Appellate Body over time eroded the strength of those tools, even creating commitments that the parties had expressly declined to make during negotiations. The EU has been well aware of this dynamic, having lost the first of several disputes involving one of the commitments in question.

The 2016 double shock of Brexit and the election of Donald Trump should have served notice that popular discontent was manifesting as an angry rejection of the system as a whole. Yet trading partners who had come to rely on export-led growth largely rejected calls for change, instead pressing for more of the same. Similarly, despite a clear message that NATO partners needed to bear more of the burden of collective security, now-wealthy allies neglected to step up.

The COVID-19 pandemic drove home the vulnerability that comes with that kind of domination. Not only did shortages of personal protective equipment prove lethal, but production around the world was hamstrung when Chinese lockdowns persisted.

The Biden reset and Trump 2.0

The Joe Biden administration came into office offering strong support for the transatlantic relationship, from declaring a truce on rancorous trade disputes like Boeing-Airbus in 2021 to providing military support to Ukraine in the wake of its invasion by Russia. Europeans consistently expressed fear of a second Trump administration but, in the end, seemed disinclined to do much to bolster the Biden administration’s efforts to address the core challenge of US deindustrialization. The European posture was infused with a conviction that the only proper course was restoration of the status quo ante. Early on, one European paper characterized Biden as “Trump with manners,” a line that administration officials would routinely hear in person. To meet climate commitments, as well as to begin to address deindustrialization, the United States enacted the Inflation Reduction Act (IRA). Europeans responded by complaining that the IRA represented a “continuation of President Trump’s hard-nosed America First policies.” A more pragmatic and less ideological analysis revealed that the IRA played to European manufacturing strengths and thus presented an opportunity, rather than a constraint, for European exporters.

“Europe risks not only the loss of export opportunities to the United States, but the possibility that the European market will itself become the destination of choice for the next China Shock.”

Now we have the second Trump administration. It is indeed engaged in hard-nosed “America First” policy, deploying tariff authorities in unprecedented ways while criticizing trading partners for regulating their economies contrary to the preferences of some US multinational corporations—the very thing the Biden administration had declined to do. This policy led not only to Turnberry, as the Europeans felt a trade war would lead to an even worse outcome, but to an ongoing discussion about European regulatory sovereignty.

The EU position is more precarious still. Europe risks not only the loss of export opportunities to the United States, but the possibility that the European market will itself become the destination of choice for the next China Shock. All this is happening as the Trump administration expresses fatigue with guaranteeing Europe’s security.

The way out

Is there a way out of this downward spiral? Yes. But it requires policymakers around the world to spend less time pining for the past and more time focused on what to build next.

Fortunately, there are signs that a shift is taking place. Germany’s willingness to remove the debt brake for defense spending suggests that the long-standing goal of having Germans consume more and export less might indeed be coming to pass—all while addressing outsized dependence on the United States for security. It is a fraught debate. If Germany pairs military Keynesianism with austerity, the result could be an acceleration of authoritarian sentiment reminiscent of the policies that ushered in the end of the Weimar Republic. Still, the shift in approach is a positive step.

Germany’s efforts have been followed by a pledge for Franco-German cooperation, signaling a shared commitment to charting a new path for Europe to extricate itself from these challenges. On a still broader European scale, the recent report by Mario Draghi rightly argues that the EU must do more to integrate and unleash the power of the internal market.

Similarly, there are signs that China is wrestling with the harmful consequences of its economic model. Xi Jinping recognizes that fierce internal competition leads to excessive production (much of which is then exported). As finance professor Michael Pettis has argued for years, China must find a way to encourage greater domestic consumption, relieving the emphasis on exports that is problematic for advanced economies and has also contributed to premature deindustrialization in less advanced economies.

“If other governments succeed in reducing their dependencies, the United States will have less influence.”

The United States must also adjust. If other governments succeed in reducing their dependencies, the United States will have less influence. Shifting overnight to a world of pure power politics, coupled with the erosion of US domestic rule of law, will have implications for the long-term viability of the dollar as the reserve currency. That, in turn, will have implications for the servicing of US debt, which is expected to grow as a result of the One Big Beautiful Bill.

The answers suggested here lie principally in the domestic policies of each relevant economy. Many trade experts reach for trade tools, such as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and other free trade agreements (FTAs), as the escape hatch. Yet too few understand what these agreements actually do: They lock in existing supply chains rather than diversify them. This is especially true for intermediate goods. If Europe is looking to further strategic autonomy by diversifying away from existing dependencies—one of the goals of the Franco-German alliance—then signing agreements that incentivize half the content of an FTA good to come from non-FTA partners will not do the trick.

None of these transitions is without cost or pain. Europe has struggled for decades to complete the internal market. Still, even the shock of the first Trump administration did not move Europeans to minimize their exposure in any significant way. Weighing existential threats to Europe, Draghi—who recognizes the shortcomings of the old system—pleaded before the European Parliament: “Do something!”

China’s reorientation of its economy toward consumption will not be easy either, which is why it has not yet happened. But the potential consumption power of its huge domestic market means that China is not fated to play the role of a predatory global monopolist, distorting markets and crushing the ability of market-oriented producers to compete.

The biggest obstacle to moving toward a global trading system more suited to contemporary circumstances might be intellectual: the lingering belief that there is, in essence, only one way to do globalization and it was done in 1995. History tells us otherwise. The previous great globalization boom was grounded in UK hegemony, colonialism, and the gold standard. This model also once seemed inexorable. Yet the onset of World War I proved the beginning of the end. Countries struggled for two decades thereafter to salvage the gold standard, but they were eventually forced to accept the demise of what John Maynard Keynes referred to as a “barbarous relic”—and to come up with something else.

The post-war regime, suited for its era, encouraged dependencies that shifted over time from beneficial to unhealthy. We are now living through a period in which the adverse consequences of those dependencies have become manifest. Just as the architects of the post-war vision summoned the courage and imagination to create a new system to foster peace and stability, so must we.

Elizabeth Baltzan is a Senior Fellow at the Atlantic Council GeoEconomics Center and a former Senior Advisor to the US Trade Representative. 

Check out our other policy briefs for the Transatlantic Forum on Geoeconomics:

„Points of Vulnerability in the Battery Cell Industry“ by Kai Müller, Chief Financial Officer at PowerCo SE. and Sören Pippart, Senior Expert for Public Affairs at PowerCo SE.

„The dollar in the fight for US primacy“ by Martin Mühleisen, former International Monetary Fund (IMF) official and nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

„Waiting for the Big Bang: Executing the European Defense Build-Up in Germany“ by Robin Fehrenbach, Director of Research and Documentation at Atlantik-Brücke, Jakob Flemming, Senior Program & Research Manager at Atlantik-Brücke and Julia Friedlander, CEO of Atlantik-Brücke

„How to dismantle a reserve currency“ by Daniel McDowell, nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

„The summer of AI action plans“ by Alisha Chhangani, assistant director at the Atlantic Council GeoEconomics Center and Ananya Kuma, deputy director, Future of Money, at the Atlantic Council GeoEconomics Center.

Der Beitrag The road to Turnberry erschien zuerst auf Atlantik-Brücke e.V..

Mr. Hodges, free and safe international shipping routes are essential for peace and stability in the globalized world. Now the crisis in the Strait of Hormuz poses a severe threat for international oil tankers. Are you disappointed about the German government’s decision not to join a combined British-U.S. naval mission?

Yes, I am.  Germany is a long-time, reliable ally, so I’m a bit surprised at their reluctance, thus far, to join this mission. German leadership is essential for stability in many of the critical regions of the world, including the Middle East. The brand name, “Made in Germany”, is respected around the world and other nations take note when Germany decides to act or not. Whether in the construct of a multilateral coalition, NATO, or a European construct, Germany would add real value to this mission in terms of diplomatic, information space, and economic value as well as military support.

Surprisingly, Germany is also a “Non-participant” in the four EU PESCO (Permanent Structured Cooperation) projects that are directly related to maritime security. This seems unusual for a leading nation in the EU and NATO and a global economic trading power that depends on freedom of navigation for its economic security and prosperity.

Is U.S. President Trump’s “policy of maximum pressure” vis-à-vis Iran and the future of the Nuclear Agreement (JCPOA) an effective way to guarantee peace in this region?

[related]I would have preferred that the USA remain in the JCPOA. Not because it was a good or the best agreement, but because I believe in the value of having and working with strong allies towards a common objective. The JCPOA was inadequate to address all of the key security issues. And the current Iranian regime has clearly been creating instability in the region in support of various extremist organizations for years. Many American soldiers died in Iraq as a result of EFP (explosively formed penetrator) IED’s (improvised explosive devices) which were manufactured in Iran and supplied to insurgent forces. But by working closely with the leading nations of the international community, especially Germany, I believe we could have continued to press Iran using all the elements of national strength and of the coalition’s power. This is what we call the DIME construct (diplomacy, information, military, and economy).

Stability in the region is a necessary precursor for prosperity in the region and, because of the importance of energy resources, much of the rest of the world. The best way to guarantee stability in the region is to involve all the parties interested in the process, to enforce international law, and to maintain a united front.

What are your hopes for transatlantic cooperation in the Middle East in the upcoming weeks and months?

Transatlantic cooperation is essential, there is no other way to achieve meaningful, lasting results. NATO is the most successful alliance in the history of the world. There is a reason it has continued to grow since its founding in 1949. As Secretary General Stoltenberg recently said, NATO means that every member has 28 other friends with common values and shared interests.

None of us has adequate capabilities in any of the DIME domains to go it alone. And we are indeed much stronger together, when we can prevent potential adversaries or the relevant regional parties from driving wedges between us.

Germany has a key role to play in the region not only because of its economic requirements and the need for energy for customers of the German auto industry, but because of its moral authority. Germany is respected around the world and currently has a key seat on the UN Security Council. This, combined with its leadership in the EU, make it the nation that I believe is America’s most important ally. I hope that my country will pursue Germany as our most important ally. I also hope that Germany will step up to accept a leading role in the region.

Learn more about Ben Hodges on his CEPA-profile site.

Der Beitrag Hodges: “Germany’s reluctance surprises me” erschien zuerst auf Atlantik-Brücke e.V..

By Peter Rough

Since the end of the Cold War, the strategy of German foreign policy has been a twin reliance on multilateralism and the United States. Of course, there have been notable exceptions to this approach. Today, Germany insists on proceeding with Nord Stream 2 over the objections of its allies. And who can forget Berlin’s campaign against the American-led war in Iraq last decade. Such exceptions aside, however, Germany has mostly embraced both pillars, convinced that together they would facilitate the grand denouement of liberalism’s triumph.

Today, however, a key pillar in German grand strategy is showing cracks. A bevy of issues is chipping away at the relationship with the United States—and with no apparent end in sight. This is all the more worrying because current disagreements between the U.S. and Germany appear to be structural and enduring rather than discrete and temporary. Unlike in the past, the reason for today’s disagreements is a basic misalignment between the two countries: in contrast to Germany, which still issues peace dividends in the form of military cuts, the United States has left the post-Cold War era behind. In the process, it has shifted from accommodation to competition, intent on confronting revisionist actors like China in various venues. By now, it seems improbable that the U.S. will snap back to the status quo ante in the coming years.

The talk has been of replacing the American pillar with one designed in Paris

[related]For Germany, which wishes to sustain the post-Cold War setting for as long as possible, this is a sobering prospect. Today, German leaders are casting about for ways to defend an order within which they had grown peaceful and prosperous. Of late, the talk has been of replacing the American pillar with one designed in Paris: European strategic autonomy.

There are few, if any, American defense officials who take such a prospect seriously, however. And for good reason: Europeans have talked of strategic autonomy for years without taking the necessary steps to make it a reality. Just this week, news broke that Germany’s defense budget may decline to 1.25 percent of gross domestic product by 2023. And last week, Germany’s presumptive next chancellor floated the idea of building a European aircraft carrier as a symbolic gesture, apparently without considering the fact that no European navy exists. Aside from concerns about economic protectionism in the defense sector, European defense initiatives are greeted in Washington with an eye roll and a shoulder shrug.

Similarly, eastern Europeans have watched the debate in Berlin and Paris with skepticism. Unless Germany manages a near miraculous strategic transformation, Europeans living within the shadow of Russia will prioritize their relationship with the United States over all others. The implication is that a hasty campaign for strategic autonomy risks isolating Germany (and France) more than the United States. But if strategic autonomy is merely an ornate pillar with a hollow core, how can Germany support the multilateral order on which its values and exports depend?

A fool’s errand to construct multilateral structures on the quicksand of revisionism

As it has for decades, the answer lies in the transatlantic alliance. The first step is to recognize that the United States and the multilateral system are interwoven like hair in a braid. It is no coincidence that multilateralism thrived most during America’s unipolar moment. Relatedly, the challenges to it today are the direct outgrowth of a shift in the global distribution of power. Sensing that their moment has come, Russia and Iran have issued major regional challenges to the United States. And globally, China is increasingly testing the system as it charts its own path to superpower status. From theft of intellectual property to annexations of territory and sectarian campaigns of aggression, these actors have demonstrated a basic hostility to the values that underpin the American-built framework. It is a fool’s errand to construct multilateral structures on the quicksand of such revisionism. To do so creates awkward, even dubious arrangements. Instead of the Iran deal, Nordstream II, and Huawei, Germany is better off aligning with the United States in its attempt to hold bad actors to account and inject accountability into the system. Only with the combined strength of Europe and the United States can a true multilateralism gain momentum again.

In the Financial Times last summer, Henry Kissinger argued that a divided Atlantic would simply turn Europe into “an appendage of Eurasia,” which would be at the mercy of China seeking to recapture its ancient role as “the principal adviser to all humanity.” Undoubtedly, the Trump administration is a difficult partner for Berlin. As the Atlantik-Brücke/Civey survey this winter showed, almost 85 percent of Germans view relations with the United States as bad. But Germany faces a choice: it can either support a pugnacious yet fundamentally liberal and democratic partner in the United States or back a diplomatically adept but fundamentally illiberal and authoritarian challenger in China. That is not much of a choice at all. It’s time to rededicate ourselves to the transatlantic project.

You can find Peter Rough’s detailed curriculum vitae here.

Der Beitrag Time to Realign with the United States erschien zuerst auf Atlantik-Brücke e.V..

Dr. Ailish Campbell is Canada’s Chief Trade Commissioner and assesses the outcomes one year after CETA’s implementation: 99 percent of the Canadian-European Free Trade Agreement have already come into force, and the exchange of goods has already been stimulated noticeably. Campbell also explains in the conversation what is at stake in the final phase of the NAFTA renegotiations with the United States. Read in the following a shortened version of our Transatlantic Call with Dr. Campbell.

Dr. Campbell, the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union is generally regarded as one of the most progressive, fair, and ambitious Free Trade Agreements at least of the last few years. CETA has provisionally entered into force on September 21 of 2017. Since then one year has passed. Can you tell us how the ratification process is making progress?

I am very pleased to say that 99 per cent of CETA on a trade-weighted value perspective have come into force. These are the elements that are under Commission authority on your side and which here in Canada are clearly under federal jurisdiction. The agreement now also requires ratification in member states.

Which economic successes in trade and investments can already be seen from CETA?

I would note that exports from both the EU and more specifically from Germany to Canada are up to 7.8 percent. This is only merchandise export of goods. We are also awaiting annual services data. Here in Canada trade is also up overall to the European Union including up 7 percent to Germany. The idea, though, that we should only look at what we are exporting to one another as if that is the measure of the agreement, does not provide a full picture. You may recall that there is someone else who is very focused only on the trade balance.

You are referring to U.S. President Donald Trump.

[related]Correct. We have to look at our two-way foreign direct investments, our innovation collaboration, our collaboration on the environment including the implementation of the Paris agreement. Student exchanges and a very rich history between Canada and Europe are also included in the full picture not only in the sense that a good portion of Canadians are of European descent. But also in the sense of continuing to do fantastic innovation together including clean cities and mobility. CETA is just one element of our long and enduring relation and collaboration. We should also take a more holistic view of our economic and social linkages.

The agreement is particularly progressive in terms of labor rights and environmental protection. Quite frankly, it is a masterpiece of negotiation led by Chrystia Freeland, now Canada’s Minister of Foreign Affairs and the former Minister of International Trade. Does CETA have a positive impact on other negotiations of free trade agreements?

We hope so. Certainly, we have used aspects of the CETA negotiations in our work on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) specifically looking at issues related to the environment as well as labor. As you are seeing NAFTA being renegotiated we long had labor and environmental chapters there. We would like to see those become more robust. We also proposed a chapter on gender and on indigenous first nations’ trade in NAFTA as well. We will only see as these negotiations conclude what is in the final agreement. You have hit on a really important point. It is very simply this that our values are very well aligned between Germany and Canada, in particular the high protection of labor.

Our values are very well aligned between Germany and Canada, in particular the high protection of labor.

In the Mexico-U.S. negotiations on NAFTA our general position was: Please negotiate whatever you want into the highest standard. Because Canada continues to have the highest all-in wage compensation for workers. We continue to have the most robust public health care system. We are far more like Europe and various models particularly France and the UK than the US on health care.

The original North American Free Trade Agreement NAFTA which was ratified in 1994 is being renegotiated between the USA, Canada and Mexico. Can you tell us in which phase the negotiation is at the moment?

Today my Minister, Chrystia Freeland, is flying into Washington. The negotiations continue. We have modernized NAFTA twelve times before. New issues come to the forefront, some of those are in CETA: Everything from e-commerce to improved services standards to trade in data and digital as well as improved environmental protection. All of these things are certainly on the agenda for us. We have an offer to the US that is under ongoing negotiations right now. Prime Minister Trudeau has been quite clear publicly about where some of the tougher areas are. Those include access to our dairy industry and issues around our cultural exemption which we maintain to particularly guard French language rights in Quebec and the ability to produce our own national content. A third issue would be chapter 19 which concerns the settlement of disputes. Minister Freeland has been very active with her counterpart Robert Lighthizer. In fact, the CETA negotiator Steve Verheul is our chief negotiator for NAFTA as well, and Steve is excellent. So, we are very well prepared. Certainly, we want to see a deal that works for all three parties, Canada, Mexico and the United States.

Certainly, we want to see a deal that works for all three parties, Canada, Mexico and the United States.

Do you think the deadline that has been communicated, October 1^st, is realistic?

We are working hard. I certainly hope that our American friends will see the value in what we have tabled as our proposals.

After the U.S. government decided to pull out of the completed Trans-Pacific Partnership (TPP) between the United States and eleven further nations in the Pacific Rim, the agreement was ratified as the now so-called CPTPP by the remaining group of states including Canada. How does CETA combined with CPTPP place Canada in a strategic position for Canadian companies and foreign direct investment?

It is very clear: Canada is not the United States of America right now, it never has been, and it never will be. One of the key factors for us right now that makes us very different from the United States is our openness to the rest of the world. Our position is that we want to be the gateway on our east coast and across the country of course to CETA, to NAFTA and an effective agreement with the Americas. We are also negotiating with the Pacific Alliance in South America as well as Mercosur. We concluded the CPTPP because we find it very important to set high standards and rules including the engagement of our state and enterprises in the market economies with Asian partners.

We concluded the CPTPP because we find it very important to set high standards and rules including the engagement of our state and enterprises in the market economies with Asian partners.

Having a deal with Japan, we felt has tremendous value. It is an incredibly wealthy and important G7 country but also one that shares our values in protecting the environment and consumers. So, locking in that deal, it is very important to set standards that influence supply chains. This is the kind of deal which we hope will be open over time after ratification of the initial group of members to other countries. We will also continue to watch what goes on with the UK and Brexit depending on their decisions. We just had Liam Fox, the UK Minister for International Trade, here. We have said that if and when those exit negotiations conclude, we would also conclude a free trade agreement with the UK.

In general, as a country of 37 million people, this gives us access to over 1.2 billion consumers in the world’s richest markets: the EU, the US, Mexico, Japan, Vietnam, Malaysia and the other TPP members.

Would you recommend CETA as a role model for the United Kingdom and its future relationship to the EU?

Maybe you have seen this illustration from the European Commission trying to tell the United Kingdom how much it would lose in terms of influence by leaving the European Union. For example, it showed AFTA (ASEAN Free Trade Area) and other relationships including CETA. The Canada-EU deal was portrayed as a series of many steps. It is not a membership with the EU, we don’t have a fiscal arrangement, the Common Agricultural Policy, and Schengen. The fact that the UK never joined the Monetary Union is another important aspect. CETA is absolutely a model for the UK. But that will be up to the UK government to decide what it is pursuing. I was joking with my UK counterparts who were here: That if they copy the agreement, we should probably charge them a license fee.

CETA is absolutely a model for the UK. But that will be up to the UK government to decide what it is pursuing. I was joking with my UK counterparts who were here: That if they copy the agreement, we should probably charge them a license fee.

Free trade agreements are complicated treaties full of technical details. The bigger picture of it however symbolizes openness and cooperation in a globalized world. Does free trade have the potential to offer opposition to the trend of protectionism and isolationism around the world?

I definitively subscribe to the trade theory of peace which is that it is harder for countries that are more open and integrated to go to war with one another, that they instead see what they have in common. That has to be joined, though, with ongoing dialogue on a host of other issues. We are not just our economies, we are societies. It requires conversations on human rights. There is so much we have in common with the European Union and Germany. Having lived in the European Union and being also a EU citizen – I have an Irish passport –, I know the importance of the European Union to Germany from a social perspective and also the concerns of Germany from a financial fiscal perspective. Canada has worked very collaboratively with Germany at the G7 and G20 on fiscal consolidation. An important part of this is the very clear reporting of overall deficit and debt levels between municipal, state, federal and supranational levels. We continue to be a fiscally very responsible partner.

We are not just our economies, we are societies.

There is such a rich set of dialogues going on. It is important that we don’t put all of this on trade. I personally don’t think that trade agreements can deliver everything, like integration. If globalization is only about trade, it will fail. If globalization is also about how we take care of each other and how we take care of the environment, including elements like development aid and helping other countries to develop a rule of law and an independent judiciary, to train police and military police, then it will work.

If globalization is only about trade, it will fail.

There are different styles of interaction with the current U.S. administration on the international level. We have seen the German chancellor Merkel dealing with President Trump in a typically sober manner, and the French President Macron being very charming at first. In comparison, the Canadian Prime Minister Justin Trudeau used more direct and maybe strict words after the unpleasant sequel of this year’s G7 summit in Quebec. To what extent has this approach altered Canada’s way of negotiating with the Trump administration?

Canada has a very simple philosophy which is that the United States first of all continues to be very important to Canada and always will be. It is our largest neighbor. Millions of Canadians share if not passports then family and business connections. The United States is of course the office of the President, it is also Congress, it is also Governors of states. They are incredibly powerful in the US system. For example, in ratifying the Paris Climate Change Agreement and supporting the members of that agreement we have reached out to the very active state and city level: In New York with both Governor Cuomo and the Mayor, in California with both the Governor and the Mayor of San Francisco. Canada will continue to pursue a multi-level strategy when it comes to engage the United States. Our British traditions in one sense will keep us very focused. There is an old British saying: Keep calm and carry on. We know who we are. We know what our values are. We are a multilingual, multiracial society that is very open to the world. That is challenging and requires constant dialogue with our citizens. It doesn’t mean we are immune to any of the problems with racism that exist in the world. The Prime Minister’s commitment to inclusion of women and of LGBTQ citizens and to the environment has been very well presented and will be continued by Prime Minister Trudeau whom I have the pleasure of serving.

There is an old British saying: Keep calm and carry on. We know who we are. We know what our values are. We are a multilingual, multiracial society that is very open to the world.

Der Beitrag “One of the key factors is our openness to the world” erschien zuerst auf Atlantik-Brücke e.V..

Professor Nye, in your book “Is the American Century Over?”, written in 2015, you express the expectation that the United States will still be playing a leading geopolitical role in 2041. Have you changed your position after one year of the Trump presidency?

Certainly, Donald Trump has put some doubts in the back of my mind. It is possible that he could derail these predictions. The Americans will generally still have the capacity to play a leading geopolitical role, but I am not sure if they are going to have the will. In the 1930s Americans drew inward, even though they were the strongest country in the world. This led to a terrible decade.

Is it perhaps too early to say after one year?

Trump has drawn upon a strand of populist nationalism which is common now in all countries in the developed world. It is, however, not dominant. If you look at public opinion polls, the majority of Americans still want overseas involvement including cooperation with other countries. But the strand that Trump has called upon is there. Even if Trump goes away, which I hope he will after four years, Trumpism or populist nationalism will persist. So, there is a certain danger that we face. We have to be careful to not just pin it on Trump’s difficult personality.

Trump has drawn upon a strand of populist nationalism which is common now in all countries in the developed world.[quoter]Joseph Nye[/quoter]

You invented the term “soft power” describing the ability to attract and persuade. Did the United States become less or more attractive under Trump’s presidency?

[related]The evidence is very clear. I wrote a column for Project Syndicate saying that Trump has definitely reduced American soft power. There is a Gallup poll that shows that American attractiveness has gone down in more than 130 countries. There is a similar poll that was taken by Pew with results that were very much like those of the Gallup poll. Finally, there is an index of the soft power called the Soft Power 30 which is published in London by Portland, the British consultancy. The Americans dropped from first place in the last year of Obama to third place in the first year of Trump. That is not just a political statement or bias. There is evidence to substantiate that view.

What can be done to alter this course?

It is going to be difficult for President Trump because he tends to a bullying and unilateralist style which antagonizes others. If you use a phrase like ‘America first’ all the time, by definition this means that everybody else is second. That is not exactly the way to attract others. With that being said, however, let us note that Trump is able to make changes in his policy. Before he was elected he said NATO was obsolete. After a few months in office he discovered NATO was not obsolete. There are a lot of areas where he has initially challenged the traditions of American foreign policy but has come around to embrace those traditions. If you combine that with a resurgence in the economy, which he expects to get through his fiscal stimulus, and if that does not go off the rails into inflation, Trump can recover some of the American soft power. But he has to change his style to be able to fully recover.

If you use a phrase like ‘America first’ all the time, by definition this means that everybody else is second. That is not exactly the way to attract others.[quoter]Joseph Nye[/quoter]

Which role will the United States be playing especially within NATO in 20 years’ time?

Probably since the 1950s, since the Suez Crisis, there have been articles and predictions about the death of NATO. That is now obsolete. NATO has proven a far more resilient concept and structure because of two reasons: One is the relatively open organization for democratic societies which enables them to interact with each other, more than just at the top level. The second point is that geopolitically, Russia still is a problem or a puzzle. If Russia remains that sort of a puzzle then NATO will not be obsolete. I am leery of these views that say NATO is finished.

And what will the role of the Unites States within NATO look like?

The United States will continue to seek its interests as it has since 1945 in being closely tied to an open and democratic Europe. That requires NATO and American participation in NATO.

Trump’s “America first” strategy seems to foster American protectionism. Does this affect NATO’s strength and the United States’ long-known aspiration to shape the liberal world order?

It does. The attitude which Trump and some of his close advisors have taken, that a trade surplus is a measure of moral failure, is simply not good economics. The basic view of most regular economists is that your trade surplus and deficit has more to do with your savings and investing rates. As Trump has pressed this issue that trade surpluses are rogue and demanded renegotiation, it does spill over into other aspects of alliances. Look at the U.S.-Korea Free Trade Agreement or at the problems that Trump has had with his visits with Chancellor Merkel. This is a real problem.

Trump urges the Europeans to invest more in their military abilities. Is he right?

Asking the Europeans to do more to contribute to common defense has a long, long history. The 2-percent-target goes back many years. But because of his bluster and style Trump may be more credible than Obama on that.

Does he have more credibility by being more forceful in that matter?

Sometimes nastiness as a hard power is more effective than soft power.

Do you think the United States would ultimately appreciate a stronger European commitment within NATO?

The US has been interested in a stronger European military for some time, well before Donald Trump. There was a period when I was in the Defense Department in the 1990s when there were certain fears that France was trying to lead Europe out of NATO or reduce the American role in the alliance. That is ancient history. The view for a decade and more has been that a stronger Europe inside NATO is better for the United States. That is actually a pretty widely shared view among those people in the United States who pay attention to foreign policy.

What are the main and most urgent strategic challenges for NATO?

The issue of the return of great power politics and the issue of how Russia will behave will require a combination both of deterrence and also a way to think about retaining the democratic processes in Eastern and Central Europe. Both challenges are going to be central to NATO. I don’t expect countries like Poland or Hungary to defect to Russia. That is not plausible. But the quality of democracy in some of these former Visegrád countries has been under challenge from this same type of right-wing populist nationalism which has affected the United States. In addition to having a strong deterrent posture to prevent Russia from using its strength to bully its neighbors and expand, both NATO and the European Union have to think about the internal quality of democracy.

The issue of the return of great power politics and the issue of how Russia will behave will require a combination both of deterrence and also a way to think about retaining the democratic processes in Eastern and Central Europe.[quoter]Joseph Nye[/quoter]

Are you less optimistic than 20 years ago that there will ever be a world in which Russia does not see NATO, the United States and Europe as competitors or even enemies?

20 years ago, we believed there was a profound change going on in terms of democratization and liberalization of Russia. That has been reversed. Part of it may have been mistakes made by the West. The Bush administration’s efforts to expand NATO membership right to the borders of Russia in Georgia and so forth were not appropriate in terms of reassurance for the Russians. But it is also true that some of the changes that occurred inside Russia have to do with problems in Russian society and economy which were not caused by NATO expansion.

But this serves as a good explanation for Russia blaming NATO for its domestic difficulties …

That is right. If one looks back at Putin’s policies and especially his Munich Security Conference speech in 2007, you can see this kind of blaming. The views that we had in the 1990s, when Yeltsin was in power and we used the NATO-Russia Council as a way to integrate Russia into NATO were overly optimistic. But if you take a long-run view we certainly should be hoping that changes inside Russia will allow a Europe that includes Russia again. But I don’t expect that in the near term, unfortunately.

When Obama was president one could get the impression that the relationship with Russia was not at the top of his agenda. Could that change with Donald Trump?

Ironically, one of the things that Trump got right in foreign policy was to think of ways to try to reduce the tensions with Russia and to improve the relationship. It is not that one has to accept Russian behavior. But it is true that Russia is a great power. We have to do business with them. To sharpen antagonism is not healthy for Russia, for Europe and the United States. In that sense, Trump’s insight might have been better even if his motives were somewhat unclear. Putin and the Russian intelligence overachieved in their efforts to interfere in the 2016 election and they have made rapprochement with Russia so radioactive inside American politics that not even Trump can do anything about it.

Putin and the Russian intelligence overachieved in their efforts to interfere in the 2016 election and they have made rapprochement with Russia so radioactive inside American politics that not even Trump can do anything about it.[quoter]Joseph Nye[/quoter]

The Munich Security Conference 2018 will focus in particular on the future role of the European Union as a global actor and its relations with Russia as well as the United States. What is your opinion on the EU’s future role?

The EU plays a very important role. I have always thought of the EU as a magnet which should draw others towards an open, rules-based society both domestically and internationally. On the other hand, there is a historical danger of Central Europeans like Germany being drawn too much into the Russian orbit. The effort is to build bridges – but sometimes in the effort to build bridges they may go too far. The key question for Europe is whether it is careful enough not to be played by Putin in order to divide the United States from Europe. It is interesting to me that the sanctions were applied to show that a country cannot steal its neighbor’s territory without paying a price. Those sanctions applied after the annexation of Crimea have maintained an important role and the West is not divided on that so far.

Do you think the sanctions should stay for the near future?

Yes. Until you see changes in Russian behavior. One could imagine steps that might be taken to reduce Russian interference in Luhansk and Donbass for example which could lead to some degree of relaxation of sanctions in a step-by-step process. A total removal of sanctions right now would be a mistake.

There is much more movement within the European Union than in the United States. Some countries are in favor of lifting the sanctions …

Correct. Italy and other countries like the former Visegrád countries would like to see more rapid progress than is healthy. What is interesting to see is that the transatlantic relationship has survived these temptations.

What role will NATO be playing in transatlantic security policy in ten years’ time?

NATO provides a security blanket in the sense of reassurance. Despite of different national interests and different political pressures which tend to pull states in different directions there is an overarching security framework which helps states to avoid rash or desperate types of actions. NATO in that sense is a complement to the EU. But the heart of the future of Europe is obviously to find ways to continue the process that has begun under the rubric of the European Union. That does not mean a federation. The political and public opinion do not back this kind of system right now.

NATO and the EU are complementary, like hard and soft power.[quoter]Joseph Nye[/quoter]

NATO and the EU are complementary, like hard and soft power. The danger is that the Trump administration disrupts this larger picture. So far – and it is only a little over a year into his presidency – he has adapted more than I expected and has not broken that basic consensus in the Atlantic area. I don’t want to sound like somebody who is a Trump supporter because it is very clear that I am not. But it is important that we keep what he is doing in some degree of perspective. So far he has not broken the basic hard power framework which underlies a smart power policy.

Joseph S. Nye, Jr. was interviewed by Juliane Schäuble, head of the politics department at the Berlin daily paper Der Tagesspiegel.

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