The New Atlantis

Facing the Pillars of Hercules, as recounted by the philosopher Plato, the vast oceanic expanse of the Atlantic once had the legendary land of Atlantis. It was said to have been a high civilisation linking Europe, Africa and Asia, which disappeared under the ocean around 9500 BC. There is no cliometric evidence that this fabled land ever existed. But perhaps it does not matter.

The current efforts aimed at building a free-trade area linking America and Europe can be likened to the rebirth of Atlantis.

Top on the agenda of last week’s G8 Summit at Lough Erne, Northern Ireland, was the negotiations on a trade and economic partnership between the EU and the United States. In his State of the Union Address to Congress in early February, President Barack Obama had told the American people that a trade agreement with Europe would open up vast business opportunities for American firms. Across the Atlantic, European Council President Herman Van Rompuy and Commission President Jose Manuel Barroso also announced their commitment to reaching a trade partnership with America.

This initiative could not have come at a more crucial moment. The sub-prime crisis that started on Wall Street in the autumn of 2008 has been a catastrophe for the American economy. The contagion has swept across the Atlantic, throwing the nations of Europe into the worst recession since the Great Depression. Greece and Cyprus are in a complete financial quagmire. The fiscal deficit in Spain stands at nearly 100 per cent of its GDP, while that of Italy and Portugal have exceeded 90 per cent. The situation is not much better for France and Britain. Germany stands alone as the regional powerhouse that can balance its budget. But Berlin is unwilling to get the European Investment Bank to underwrite the debt of the countries in crisis without committing to a unified European fiscal space. The other Europeans see it as the German penchant for bullying all over again.

As for the United States, the Federal Reserve chairman Ben Bernanke, an economist I admire, has for long indulged in the dark arts of alchemy that go by the name of ‘quantitative easing.’ This simply refers to the printing of money to purchase financial assets from commercial banks and other private financial institutions to increase the monetary base. The Fed has gone from QE1 to QE2 and now QE3, with over $2 trillion of greenbacks pumped into the economy.

A French economist recently complained that the role of the US dollar as an international reserve currency has been artificially propped up by a combination of chutzpah and blustery, and that, if left to market forces, we would be in for a shocker. It is no surprise that the German Bundesbank and the People’s Bank of China have quietly been amassing gold as though there is no tomorrow.

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The USA and the EU constitute 50 per cent of global output. With a population of 316 million, the USA has a GDP of $15.685 trillion and a per capita income of $50,000. The EU is a community of 27 nations with a total population of 504 million. The European GDP currently stands at US$16.57 trillion, while its per capita income stands at about US$32,000. Of the two, the USA is the more prosperous, with a high human development index and a highly entrepreneurial and innovative economy. While the EU grew by only 0.2 per cent in 2012, the USA grew by 1.8 per cent. By year’s end of 2013, the American economy is forecast to reach 2 per cent while Europe is likely to regress to 0.1 per cent.

Both are advanced industrial economies with open markets and a highly internationalised trading sector. However, Europe cannot escape the popular impression of being a hobbled bureaucracy that changes with the speed of an oil tanker. The EU is seen as a progressive soft power that eschews the use of force – a moderating voice in international affairs. Europe is a community governed by laws rather than shadowy interests such as the American National Rifle Association and the tobacco and weapons lobbies. But Europe is also a vast bureaucracy with a bedlam of voices that once drove Henry Kissinger to despair.

While the idea of a ‘fortress Europe’ is closer to reality than the rhetoric would suggest, the United States is a melting pot of cultures which continually re-energises itself with innovative thinking. Race remains the American Dilemma even in the Age of Obama. However, as the French aristocrat and political thinker Alexis de Tocqueville once noted, the greatness of America “lies not in being more enlightened than any other nation, but rather in her ability to repair her faults”. Europe, it would seem, has always needed a crisis to renew herself.

The project of the New Atlantis is perhaps inspired by the awareness of the fact that the centre of world economic gravity is moving from the Atlantic to the new economic powers in Asia, Africa and Latin America. Not too long ago, the Governor of the Bank of China, Zhou Xiaochuan, wrote a series of articles arguing for a new international monetary order that would accommodate the emerging economic powers in the international monetary system.

It is expected that the talks, if successful, will remove the last remaining barriers to free trade within the Atlantic community of nations. Several bottlenecks would have to be addressed. French President François Hollande has insisted that France’s ‘cultural exceptionalism’ must be taken into account in constructing the new trade agreement. The French would like to exclude video, film, broadcasting and other ‘cultural products’ from the agreement purportedly to protect France’s unique cultural status in the world – whatever that is. The corruption-ridden EU Common Agricultural Policy, which maintains heavy subsidies for European farmers, will require further reforms.

It remains to be seen how the New Atlantis will accommodate developing neighbours such as Mexico on the border of America and Africa, with whom Europe has maintained long-term trading relations.

Chef de Cabinet, African, Caribbean and Pacific Group of States.