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New alliances

Géopolitique

New alliances - 19/06/2025

I New global order – new complexity

The global economic order that we have been accustomed to since the late 1990s appears to be increasingly disintegrating. Even if it is unclear what a new order will look like, it is obvious that the era of the rules-based global multilateral order is coming to an end. The existing actors and institutions will not disappear. But their influence changes dramatically, away from all-encompassing multilateral institutions to more thematic-driven agreements amongst fewer countries. This results in a sensibly higher level of complexity also in the field of global trade and economic policy. The ability to form and manage alliances will thus be a central criterion for future success. 

New roles for international institutions 

First and foremost, the WTO as a multilateral organisation that sets global trade law and enforces its implementation does hardly fulfill this task anymore. At the heart of this failure is the widespread rejection – not only in the USA – of an international jurisdiction that supersedes national law. This loss of sovereignty is unacceptable to many states. On top of this, the basic principles of the WTO – which most members adhere to even without a sanctions mechanism – are also under pressure. Under President Trump, for example, the USA has abandoned the principle of the Most Favoured Nation Clause (MFN), at the latest with the announcement of different tariffs for different countries on 2 April 2025. However, the WTO rules remain relevant for a group of willing parties and continue to define guidelines for trade among this group. 

In particular, the instrument of plurilateral agreements – discussions at the WTO in which only a subset of Members are participating – does gain in importance. Plurilaterals can aim to create new rules, secure mutual liberalisation of tariffs, create a new process or launch a conversation. In times of great confusion, open plurilateral agreements are particularly promising. They can be concluded by small groups, but do not discriminate against other WTO members and therefore cannot be blocked by others. 

Not less importantly, a large number of often overlapping institutions and agreements below the global level should be considered. These include:

  • Regional economic organisations such as the EU and, at a lower level of integration, the AU, ECOWAS, ASEAN, MERCOSUR and free trade agreements such as CPTPP, RCEP and USMCA amongst many more. 
  • Bilateral free trade agreements amongst a subset of nations or regions, as i.E. the EU-Mercosur agreement. These are actually only intended as well-founded exceptions within the framework of the WTO, as they undermine the most-favoured nation clause. Today, regional FTAs are no longer exceptions, but rather the rule.
  • New are technical agreements below free trade agreements in which standards and other technical issues are harmonised. Examples are the ‘Trade and Technology Council’ between the EU and the USA, elements in the CAI between the EU and China, the Indo-Pacific Economic Framework, elements in RCEP, etc. These have not yet achieved any great significance, but China in particular is working intensively on them.
  • For technical agreements and comprehensive arrangements below the WTO, we find organisations with exclusive membership that primarily serve as a coordination or forum, such as the OECD, the G20 or BRICS. 

II Common interest and smart cooperation

Even if there is obviously no longer an all-encompassing framework in global trade and economic policy, there are still common interests between different countries and regions. These should be used and institutionalised for the benefit of both sides, for example in the following fields:

Raw materials policy

Particularly in the area of raw materials supply groups of suppliers and buyers with clearly differentiated interests can easily be marked off.  Most OECD countries are buyers of almost all raw materials. It therefore makes sense to form alliances for the safe provision of certain groups of raw materials. In the paper ‘EU-Japan critical raw materials alliance’, the KAS, together with the Japanese think tank NPI[1], has outlined a raw materials alliance for raw earths. The analysis shows above all that it is crucial to clearly define relating interests and to assign clear responsibilities to responsible institutions.

Resilience in supply chains

The issue of resilience in economic policy is becoming more prominent not only in relation to raw materials, but also with regard to dependencies in supply chains. However, the extent of such dependencies is usually overestimated. For example, a study published by the KAS together with the Ifo-Institute shows that there are no problematic dependencies in the industrial supply chains of German industry for 95% of imports. Of the remaining 5%, 73% of imports come from the EU, which should be considered harmless[2]. This leaves only a mid-double-digit number of problematic import groups, most of which come from China. This problem should not be ignored and also tends to grow in view of figures from the IW Cologne[3]. Trade policy measures thus appear appropriate for key supplier products such as industrial magnets, some chemicals and pharmaceutical raw materials, defence and communication technology or energy equipment. With regard to such measures, the guiding principle should be that the fewer market participants are excluded, the smaller the loss of prosperity due to the restriction of related trade. As outlined in a recent KAS-Paper on tariffs, alliances for certain goods would be smart solutions in such cases. The second-best solution is concentration tariffs, which only work against the country to which the dependency exists. Subsidies and other industrial policy measures are the most expensive option[4].

III Options for action

Openness towards multiple alliances

In the situation described, it is right to support the remaining functions of the WTO and other existing institutions. However, it is necessary to develop alternatives. To this end, it is paramount to act from a strong base that has global weight. From this basis, stable economic-diplomatic relationships need to be maintained with as many players as possible. The aim must be a system of various alliances and agreements whereby several levels must be kept in view:

  1. Securing a strong and effective home base with global importance, i.E. the European Union. 
  2. Maintaining, developing and refining global agreements. Open plurilateral agreements are suitable for specific issues. However, coalitions of the willing will also be necessary outside the WTO. Organisations with globally broad membership, but limited in terms of values or interests, such as the OECD, BRICS, G7 or G20, will grow in importance and should be cultivated and actively developed as a forum for alliance building on multiple levels. 
  3. At a bilateral level, agreements (free trade agreements, technical agreements on standards, etc.) must be sought and maintained with partners who share key interests and/or values in certain sectors. 
  4. The basis for this is the intensive cultivation of central partnerships (for the EU, for example, Japan, Korea, Canada, Australia, UK, Switzerland) but also the integration or in worse cases the containment of problematic partners (Turkey, India, Russia), of potential veto players (USA, China) and perspective partners (Brazil, Argentina, AU, Gulf states, etc.).

 We need to strengthen our capabilities in economic diplomacy

In an increasingly complex global economic order, alliances are constantly changing or need to be readjusted. This makes it necessary to significantly expand capabilities in economic diplomacy. The European External Action Service, as well as the national foreign ministries, must set up dedicated departments for this purpose. These, in turn have the task of prioritising interests and objectives and coordinating them at European level. To this end, training capacities must be created, such as a European Academy for Economic Diplomacy, which can develop and offer seminars and training content for the training programmes of the different diplomatic services.

But even with significantly increased capacities in economic diplomacy, it will hardly be possible to meaningfully maintain a large number of alliances if too many different issues are addressed. In recent years, EU trade and economic agreements have become so extensive that negotiations have dragged on for years or even decades, often without success. In order to be able to conduct effective economic diplomacy, it therefore makes sense to concentrate on the core issues of trade policy, investment protection and dealing with subsidies. Other issues that have often been associated with this, such as social or environmental policy aspects, should be separated from this and addressed by other departments and in other international – but no less binding – agreements.

 The new world is becoming more compartmentalised and interest based. Here, we cannot choose if we want to cooperate with one or another actor. The question will be, how and in which sector to cooperate. Foreign economic policy should be organised accordingly, so that new alliances around topics can be managed effectively.

[1] Cernicky, Peter, Rieck-Moncayo, Hosoi, Isagami (2024) EU-Japan Critical Raw Materials Alliance – Konrad-Adenauer-Stiftung

[2] Flach et al (2022) Internationale Wertschöpfungsketten – Reformbedarf und Möglichkeiten p. 27f:  f10b042d-d813-b0ab-3726-482e046e842b

[3] J. Matthes (2025): Importseitiges De-Risking von China im Jahr 2024

[4] Cernicky (2024):  Sind ausgerechnet Zölle die Rettung des Freihandels? Über punktuelle Zölle kann man reden – über Schutzzölle nicht