The Centre for European Reform is a think-tank devoted to improving the quality of the debate on the European Union. It is a forum for people with ideas from Britain and across the continent to discuss the many political, economic and social challenges facing Europe. It seeks to work with Divided world similar bodies in other European countries, North America and elsewhere in the world. The CER is pro - E u ropean but not uncritical. It re g a rds European integration as largely benefic i a l but recognises that in many respects the Union does not work well. The CER there f o re aims to The struggle for p romote new ideas for re f o rming the European Union. Director: CHARLES GRANT ADVISORY BOARD primacy in 2020 PERCY BARNEVIK........................................ Board member, General Motors and Former Chairman, AstraZeneca CARL BILDT.................................................................... Swedish Foreign Minister and Chairman, Kreab Group ANTONIO BORGES..................................................................................................... Former Dean of INSEAD NICK BUTLER (CHAIR).......................................................................... Group Vice President, Strategy, BP p.l.c. LORD DAHRENDORF .......................... Former Warden of St Antony’s College, Oxford & European Commissioner VERNON ELLIS............................................................................................ International Chairman, Accenture RICHARD HAASS.................................................................................. President, Council on Foreign Relations LORD HANNAY.................................................................................... Former Ambassador to the UN & the EU IAN HARGREAVES............................................ Fo r m e r Group Director of Corporate and Public Affairs, BAA plc LORD HASKINS .......................................................................................... Former Chairman, Northern Fo o d s FRANÇOIS HEISBOURG................................................ Senior Adviser, Fondation pour la Recherche Stratégique LORD KERR.............................. Deputy Chairman, Royal Dutch Shell and Former Permanent Under Secretary, FCO FIORELLA KOSTORIS PADOA SCHIOPPA............................................... P r o f e s s o r, La Sapienza University, Rome RICHARD LAMBERT........................................................ Director General, The Confederation of British Industry PASCAL LAMY......................................................... Director General, WTO and Former European Commissioner D AVID MARSH........................................................................... D i r e c t o r, London & Oxford Capital Markets plc DOMINIQUE MOÏSI................................................ Senior Adviser, Institut Français des Relations Internationales JOHN MONKS.............................................................. General Secretary, European Trade Union Confederation DAME PAULINE NEVILLE-JONES........................................... Chairman, IAAC and Former Political Director, FCO CHRISTINE OCKRENT...................................................................................... Editor in chief, France Télévision WANDA RAPACZYNSKI.................................................................. President of Management Board, Agora SA LORD ROBERTSON.......................... Deputy chairman, Cable and Wireless and Former Secretary General of NAT O Mark Leonard KORI SCHAKE............................................ Research Fe l l o w, Hoover Institution and Bradley Professor, West Po i n t LORD SIMON ........................................................... Former Minister for Trade and Competitiveness in Europe PETER SUTHERLAND........................................................... Chairman, BP p.l.c. & Goldman Sachs International LORD TURNER ............ Chairman, UK Pensions Commission and non-executive director, Standard Chartered PLC ANTÓNIO VITORINO...................................................................................... Former European Commissioner Published by the Centre for European Reform (CER), 14 Great College Street, London, SW1P 3RX Telephone +44 20 7233 1199, Facsimile +44 20 7233 1117, [email protected], www. c e r. o r g . u k © CER JANUARY 2007 ★ ISBN 978 1 901229 70 7 ABOUT THE AUTHOR Contents Mark Leonard was director of foreign policy at the Centre for E u r opean Reform until November 2006. In early 2007 he will set up and direct a new pan-European initiative of the Soro s foundations network, to promote the EU as a model for an open s t s o c i e t y. He is author of ‘Why Europe will run the 21 C e n t u ry ’ About the author ( 4 t h Estate, 2005), and ‘What does China think?’ (4t h E s t a t e , f o r thcoming May 2007). His previous CER publications include Acknowledgements ‘How to strengthen EU foreign policy’ (with Charles Grant, July 2006); ‘The EU’s awkward neighbour: Time for a new policy on 1 Introduction: The return of ‘history’ 1 B e l a r us’ (with Charles Grant, April 2006); ‘Democracy in Euro p e : How the EU can survive in an age of re f e r endums’ (March 2006); 2 Multipolar competition 5 ‘Can EU diplomacy stop Iran's nuclear programme?’ (November 3 The American world order 11 2005); and ‘Georgia and the EU: Can Euro p e ’s neighbourh o o d policy deliver?’ (with Charles Grant, October 2005). 4 The alliance of sovereignty 17 5 The world of faith 25 ACKNOWLEDGEMENTS 6 The Eurosphere 35 The author would like to thank the Economist Intelligence Unit, and particularly Daniel Franklin and Laza Kekic, for giving him 7 Swinging India 39 access to their economic data and projections, as well as their 8 The balance of soft power 45 helpful comments on the text. Katinka Barysch, Antonio Borg e s , Michael Butler, Nick Butler, Daniel Franklin, Charles Grant, David 9 Conclusion: Europe’s role in 2020 51 H a n n a y, Daniel Keohane, Alasdair Murr a y, Jeremy Shapiro, David Simon, Andrew Small, Simon Ti l f o rd and Auro r e Wanlin have all read drafts of this paper or participated in discussions on it. Thanks also to Kate Meakins for layout and production. ★ Copyright of this publication is held by the Centre for European Reform. You may not copy, reproduce, republish or circulate in any way the content from this publication except for your own personal and non- commercial use. Any other use requires the prior written permission of the Centre for European Reform. 1 Introduction: The return of ‘history’ “The century that began full of self-confidence in the ultimate triumph of western liberal democracy seems at its close to be returning full circle to where it started: not to an “end of ideology” or a convergence between capitalism and socialism, as earlier predicted, but to an unabashed victory of economic and political liberalism. What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind’s ideological evolution and the universalisation of western liberal democracy as the final form of human government.” Francis Fukuyama, ‘The End of History?’, The National Interest, Summer 1989. The world is changing – moving inexorably from an order centred on a single super-power towards one of several competing poles. By 2020, according to the Economist 1 Purchasing power party Intelligence Unit, the Chinese economy exchange rates (PPPs) provide a could overtake the US to become the larg e s t method of measuring the relative in the world, at least when measured using purchasing power of different countries’ currencies over the p u r chasing power parity (PPP) exchange same basket of goods and 1 rates. India is expected to grow rapidly to services. This type of adjustment become the third biggest economy. to an exchange rate is Alongside these Asian giants, a series of controversial because of the smaller powers – such as Iran and Russia – difficulties of finding comparable baskets of goods and services in will increasingly be able to exploit their different countries. nuclear weapons and energy to incre a s e their say in world affairs. 2 Divided world Introduction: The return of ‘history’ 3 While it will take several decades longer for the Chinese and Indian is in place. There is no consensus about the composition of global economies to catch up with the US when measured at market institutions, such as the UN Security Council, the rules for military exchange rates, the psychological impact of one of the Asian giants i n t e rven tion, or the terms of a fair settlement in regions such as the becoming the world’s biggest economy in PPP terms will be important. Central Asia, East Asia and Middle East. The rise of China and India means that power relations are unbalanced. And each of the This shift in economic power could be all the more significant, as it l a r ger countries has a diff e r ent definition of power, granting is overlaid with an ideological struggle over the shape of world v a rying degrees of importance to military might, economic clout, o r d e r. Many of the new poles of 2020 will not simply be gre a t ideological purity or the legitimacy that comes from intern a t i o n a l powers pursuing their national interest, but networks of countries law and institutions. The years between 2006 and 2020 will united by ideas about how the world should be run. In the 1990s it t h e r e f o r e be defined by mounting tension between competing