Junior Podcast Editor Moritz Ludwig (MPP ’25) talks with the executive director of the Aspen Institute Germany, Stormy-Annika Mildner, about current challenges and opportunities of trade policy between the U.S. and Europe. The transatlanticist and trade expert talks about the importance of a resilient transatlantic partnership, initiatives to strengthen economic and political ties, the Inflation Reduction Act, and the role of China.
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MORITZ LUDWIG:
Welcome to another episode of the Georgetown Public Policy Review Podcast and thanks for tuning in, my name is Moritz Ludwig, I’m a Junior Editor at GPPR and today’s podcast host. And I have the pleasure to sit together with Stormy-Annika Mildner, the executive director of the Aspen Institute Germany. Situated in Berlin, the renowned policy-oriented think tank focuses on transatlantic relations and issues of global importance and Stormy also teaches political economy at the Hertie School of Governance and calls herself a transatlanticist and a trade nerd. So, Stormy, thanks for taking the time and good to see you again!
STORMY-ANNIKA MILDNER:
Thank you so much, Moritz, it’s a pleasure.
LUDWIG:
Stormy and I, we met in 2022 when I did an internship at the German Aspen Institute and that was a quite interesting time because it was a time where the Russian war of aggression against Ukraine broke out, so that time really demonstrated the importance of a resilient transatlantic partnership. So, Stormy, maybe introduce yourself: How did you come to be a transatlanticist, and why trade?
MILDNER:
First of all, thank you so much for having me and participating in this podcast, and thanks so much again for doing an internship with us at Aspen Germany which was really a tough time in so many aspects. Not just that Russia invaded Ukraine, we were still struggling with overcoming, finally overcoming the COVID pandemic. So, we are facing multiple crises right now, so, that makes it really hard. But coming back to your question: Why am I saying that I’m a transatlanticist? Because I feel pretty much at home on both sides of the Atlantic. I don’t know if you know the feeling when you’re flying somewhere and you land and you’re at the airport and then you’re driving into the city, you get butterflies in your stomach and it feels like, aww, it’s so nice to be back. And I get that feeling a lot when I’m flying over to the United States, to Washington which I just very much like, but also when I’m flying to Illinois, to Farmer’s City, to Champaign Urbana where I did my highschool year, or I’m feeling this when I’m going to Ann Arbor where I spent some time. It’s just, it’s a feeling of going home and a feeling of excitement. And I certainly also do so when I’m then going home to Berlin where I’m now living, so that’s why I feel like a transatlanticist. But I also feel like a transatlanticist because I think we are natural partners on a lot of issues. We are very close when it comes to certain values, how we see the world, how we value to live in an open, democratic, just, and sustainable society. And I feel a lot of gratitude towards the United States. My parents are of a generation which still experienced the war. So they were little children. They had to flee where they lived and without the United States they wouldn’t have grown up in a free Germany. They were in the West. I was born in West Germany and without the United States and also the Marshall aid we wouldn’t have a Germany and we also wouldn’t have a Europe as we have today. That’s why I’m feeling a lot of gratitude towards the United States and view the partnership as really essential to deal with all those multiple crises the world is currently facing. Certainly, the EU and the US or Germany and the US cannot tackle those crises and challenges alone. But I’m very positive that neither the EU nor the United States could do it without the strong partner of each other.
LUDWIG:
Well, that definitely resonates a lot with me. I mean, I could also not study here if Germany wasn’t reunited, coming from the East of Germany. And you definitely incentivized me to pursue my Master’s abroad. So that’s why we’re here. So let’s dive a little bit into trade. What are current challenges and opportunities for the transatlantic trade in the midst of all these crises, you mentioned Ukraine, the COVID pandemic, we have the climate crisis. What does that mean for transatlantic trade?
MILDNER:
I would like to start by saying that trade is really important for our prosperity, well-being, and also stability, and in some aspect or dimension, also understanding and trust, and certainly also innovation. Why I’m saying this is because the narrative on trade is very much changing. Trade is more and more perceived from a security lens, either as an instrument to reach a certain political goal, a geopolitical goal, or as a vulnerability. And if I look at the past, I see a lot of evidence that trade contributed to less poverty in the world, to rising income in the world, to lower income inequalities and to prosperity. There is a lot of academic evidence on this as well. Never automatic, but still, it is really important. And at the same time, the last two years have also shown us that over-dependence on individual countries, and over-depencence on individual trade routes, and over-dependence on technologies which are produced in just a couple of countries mostly, and over-dependence on resources which are extracted in only a few countries, that is dangerous. That can very easily be misused, and there’s a high risk that you become hostage to a regime which does not share your values. And we saw that clearly in the Russian case. I mean, Germany was hugely dependent on the import of gas and oil and also some metals and minerals from Russia. And we certainly very much overestimated the power of interdependence. How we were dependent on Russia was very different than Russia was dependent on us. We thought that our money would create the same dependency as us importing gas and oil from Russia. And we completely underestimated that countries do have totally different rationales than ours. So even if there are mutual dependencies, if the rationale is a different one, these don’t prevent us to go into conflict or war with each other. And not just the COVID pandemic, but specifically Russia’s invasion of Ukraine opened a lot of people’s eyes in Germany that such an over-dependence is really, really dangerous and could lead to huge disruptions in our societies and economies. And thinking about where we stood in early 2022, when we also, I mean also, going throughout the year not knowing how to substitute for the gas and the oil, and then going into the fall and to the winter, not knowing if we would have warm apartments, not knowing if all those very highly energy-dependent companies in Germany, also chemical companies, would be able to produce at the same rate, I would say that the traffic light coalition of SPD, Greens and FDP did a pretty amazing job to steer Germany through this really challenging time. I mean, it could have gone a lot worse. But at the same time, I also have to say that there was a European effort, an EU effort. So, Germany would also not have been able to go through this without the help of its close partners and neighbors, and also without its close allies, the United States. So, there was a lot of support, and I would say that we steered through this crisis, not unharmed, obviously, but a lot better than a lot of people forecasted, is due to international cooperation, and in a sense also to interdependence, and also to trade, and also interdependence on financial issues. I mean, the EU is also very much an economic project, not just a political project. So, this really helped. So, whoever says that international economic relations and interdependencies are just a vulnerability and are just a danger, that’s also not true. It also helps us to get through crises like these. It helped us massively to get through the COVID pandemic. The crisis would have been a lot harder if we did not have those relationships. But just to sum it up, over-dependence, that’s a real danger and we definitely have to address those.
LUDWIG:
So, you mentioned the over-dependence of Germany on Russia. What would an analogy be for the US? Would it be China maybe? Would it be not that specific of an actor? What would you say?
MILDNER:
So, every country has to do its own risk analysis. Germany is currently undergoing this with regard to China, which also poses huge risks and we are very dependent in some sectors, not just on inputs from China, but also on China as an export market. So, every country has different vulnerabilities, which stem from different economic environment, what a country produces, how it produces this, how much internal market it has, so the US for example has a much greater domestic market, much more domestic demand. The United States also has a dollar which is still the world’s currency for transactions and also for reserves. So, in a lot of areas the US is very much still in a privileged position which also reduces vulnerabilities. But one area where there is a shared vulnerability is with regard to certain metals and minerals which are very much needed for the green transition as well as the digital transition. Those are not just the rare earths but this is also lithium and many others, palladium, many other metals and minerals which almost all of them have very high extraction and processing concentration in the world and many countries where that is done are highly political instable.
We import a huge part of what we consume with regard to rare earths, more than 90% from China, not because rare earths are only found there geologically, but because China was very clever in getting a lot of processing and production into its country also by political interventions and also by lower environmental and human rights standards and labor standards. But that is a huge dependency we share where we have to do something together about this. And another area are certainly semiconductors which are chips which are also extremely necessary for the big transitions we are currently facing, green transition and the digital transition, and there’s also a pretty high concentration in the world and not only that a lot of them are processed also in countries which are not a hundred percent democracies. If you look at the routes which and where they are traded this also creates a pretty big risk for the value chains in this sector. I’m just thinking about Taiwan and China and the Taiwan Strait. If something happened there, production would face a huge problem in the EU and the United States. And that’s one of the reasons why the EU and the US are very intensely thinking separately and together about how to reduce vulnerabilities in supply chains and make them more resilient by diversification, by building in redundancies, by stockpiling, by also creating and finding new partnerships around the world. The EU is trying to sign more free trade agreements. The US is not so much interested in free trade agreements in the old sense, but also trying to find new partnerships and agreeing on more loose agreements like IPEF, for example.
LUDWIG:
What is IPEF?
MILDNER:
So IPEF is the Indo-Pacific Economic Framework for Prosperity which was initiated by the Biden administration with quite a few other Indo-Pacific countries. And in this agreement, which is not a free trade agreement, but it is more of a cooperative platform and countries come together to deal, among other issues, with supply chain insecurity. They also want to cooperate more on due diligence and supply chains going after human rights violations. And there’s also, there are different pillars in this agreement. And there’s also something on climate change and climate change resilience. So that is one of the examples for what the United States is currently pursuing. As I said, the EU is trying to conclude and implement new trade agreements with partners. And then the EU and the US are also trying to do a lot together, for example, in the Trade and Technology Council, the TTC.
LUDWIG:
The TTC, which was founded, I think, like 2021, was it? So it’s relatively new. What kind of institution is that and what relevance does it have?
MILDNER:
So the last four years before the Biden administration, the Trump years, were really hard in transatlantic economic cooperation and integration. You remember that the US implemented, for example, tariffs on steel and aluminum, arguing that those products pose a national security risk to the United States. There was also the threat of national security tariffs on cars and there was also the escalating tariff conflict between the United States and China, which also impacted the European Union. The European Union itself answered with also tariffs on products from the United States. So, it was really a very, very tough situation. And a lot of trust was lost in that time, trust and understanding. And also a lot of knowledge was lost because people who had worked in the transatlantic relationship before also left the administration and some of the knowledge which was accumulated to the TTIP negotiations under the Obama administration because a lot went on for during those free trade negotiations on mutual recognition, on standards, on competition, on investment. There was a lot of investigation on where we could cooperate and where it might be a little bit more tricky. As we all know the TTIP negotiations didn’t go anywhere but a lot of knowledge had been created at TTIP negotiations and also trust and that brings me back to your question to the TTC, what kind of animal that is, it is certainly not a free trade agreement. The appetite, especially on the US side, for market access agreements is pretty low, but I’m also not so sure if the EU would be able to ratify a trade agreement with the United States. I mean, the geopolitical environment has changed, but I think there would still be a lot of civil society opposition to it.
LUDWIG:
Oh for sure, I would totally agree with that.
MILDNER:
So, both partners said, well we can’t repeat the mistakes of the TTIP time and we can’t be over ambitious and we can’t follow a single undertaking, nothing is agreed until everything is agreed and we can’t, although the Europeans would love to have this, legally binding agreements under international law and also a tough dispute settlement procedure and enforcement mechanism. These were all part of the TTIP negotiations. But this is not the time to do so because it would be very, very hard to negotiate an agreement like this. The appetite would be pretty low. Ratification would be really hard, if not impossible, and implementation as well. As a vision, we should not give up on this, because it would reduce tariff barriers massively and be so good for both of our economies and societies. So don’t give up on the vision, but we need something pretty fast, pretty concrete, and that’s what the TTC is doing. There are several working groups on very important issues like export controls, sanctions, investment screening, also on new technologies and the possibility of jointly developing new regulatory standards, mutual recognition of existing standards for technologies and products. It also talks about human rights issues and also labor issues, certainly sustainability issues. n So, these are the topics which are covered and through the regular meetings, not just of the heads of states, but all those working bees, let me say, in the hive, who get together all the time and exchange views, opinions, knowledge, and try to find conclusions and consensus. Trust has been, I would say, in a lot of areas recreated and more understanding. And there’s also a lot of coordination going on, may it be sanctions via Russia or the issue of implementing new instruments, like an anti-coercion instrument in the European Union. So, a lot more coordination takes place, which does not mean that we not have our conflictual areas.
LUDWIG:
And I wanted to come to that right now, because we’ve seen this example of a great transatlantic corporation, but we haven’t talked about the elephant in the room when it comes to transatlantic economic partnerships, which I would say is the Inflation Reduction Act, where there was lots of outrage in Europe when it was announced and when the domestic content requirements were presented. So how has that developed? Was there a change or is Europe still not on board with what the US tries to unilaterally achieve in climate policy.
MILDNER:
So, when you said elephant in the room, I first thought you meant China. That is another tricky issue in the transatlantic relationship. But first, the IRA, Inflation Reduction Act. So, the EU always wanted the US to do more in climate issues and invest more in mitigation and adaptation and do something about the emissions. And the Europeans would have loved to see something like the European emission trading system in the United States. They would have loved to see some more, I mean, much stricter regulations and also laws. And I think the Biden administration actually also would have loved to have a big climate and energy law with strict regulations than being implemented by the Environmental Protection Agency or the Department of Transport and so on. But a lot of lessons have been learned from the Obama administration as well as from the Trump administration. So, a big lesson learned was from the Obama administration that it’s hardly possible to get any kind of big climate change legislation through Congress, even if you have the majorities. It is extremely hard. So, tougher laws was not possible for the Biden administration. So, you could also do climate policy or climate change policy through executive orders in the United States, right? Where the president says to the EPA, I want to see X, Y, Z, or to the Department of Transport. Those executive orders, however, are easily to challenge in front of the U.S. courts and are challenged in front of the U.S. courts. And as quickly as a new president comes, they can be reversed. And we saw that so clearly during the Trump administration, which almost reversed all the Obama executive orders on environmental issues.
LUDWIG:
I mean, the US left the Paris Agreement.
MILDNER:
It did. It did. So, executive orders are also not the most promising way to do a predictable, future-oriented environmental and climate policy. So, what was left for the Biden administration as a policy instrument to address climate change, environmental degradation, and at the same time also the social dimension of climate change issues and competitiveness issues and that is investment
LUDWIG:
Okay!
MILDNER:
So huge investments into the green and into the digital transformation and that’s what he did or what his administration did. And that’s the IRA. So, in general the first reaction on the EU side was that’s really good. So because the other two options were not an option for the US, it is still going to do something massively about climate change, which will have a massive impact down the road and a lot of investment. And then everybody sat down and took a closer look at the legislation and found some things which we didn’t like so much. And those were the more discriminatory parts of the legislation which are more buy American and rules of origin oriented, which are in a way designed to reshore to home shore, to get industries back to the United States. And that is in a sense understandable just from an internal domestic national point of view, but certainly not if you look at international cooperation into the world, and that is what the EU was really unhappy about, the discriminatory nature. And it came at a time where there was a lot of progress in the transatlantic relationship and then there was the IRA with its discriminatory parts. And the EU said, well, I mean, did you forget about us? Or is this targeted against us? And there are different narratives. But I think in the heat of the moment, some of the dimensions were underestimated on the US side. It’s probably also that some legislator and policy makers were quite aware of it and they did want to get industry back to the United States, but the political repercussions, I think, were pretty much underestimated. And since then, the Biden administration has reacted to it, though. There was very quickly a committee founded, not within the tech, but outside the tech, because the tech wasn’t to be overburdened by these issues. And now the two partners are negotiating a metals and minerals agreement. You’re not discriminated against if you do have a trade agreement with the United States. So all this discriminatory section is about battery technologies and battery inputs. And to get to qualify for certain government subsidies, a certain percentage of those technologies and inputs have to come from the United States. And you do need to be a free trade partner of the United States to qualify, which the EU is not. So for Mexico, it’s not a problem. For Canada, it’s not a problem because there’s a trade agreement. And with some other countries around the world, the United States also has trade agreements. It’s not a problem for them, but a problem for us. So what we needed, or what we need, still need, is a trade agreement with the US. And we won’t have a big, as we discussed, not a big trade agreement that’s just not in the cards, but maybe a smaller sector-specific agreement which doesn’t have to be ratified by the European Parliament and doesn’t have to be ratified by the US Congress. And that could be a matters and minerals deal, like the US has also negotiated with Japan. And if that was concluded, then we would have solved at least a part of the discrimination within the IRA. I’m not saying that all would be good and we wouldn’t have any conflicts anymore, because this still leaves us with the issue of subsidies on both sides of the Atlantic, which can lead to more friction in the future. But at least one of the tricky points within the IRA would be solved.
LUDWIG:
All right. Let’s just briefly touch upon that second elephant, which you wanted to also talk about, China. We talked about it in the beginning. Why is China the second big elephant in the room?
MILDNER:
Yeah, I guess it’s not an elephant anymore in the sense that we don’t talk about it. We do talk about it a lot. It’s almost like a triangle relationship. So, for both the EU and the US, China is a partner, and Biden said that as well, because you need China to address some of our biggest global challenges like climate change. There’s no way around China. And then it is also a competitor, however. So we compete on global markets with China, and that competition is not always fair. Because China intervenes massively in trade and in finance with export restrictions and I mean lots of different instruments. So competition with China is certainly not fair, but coming back it is a competitor. And the third aspect it is systemic rival. And what do I mean when I say systemic rival, it comes down to how we want to govern our societies. We are open democracies and rule of law, transparency, justice, and so on, are important values to us, which are not as such shared by China, which is an autocracy. So we have a competition for different, or a value competition or a system competition. And having said that China is all three of those for the EU and the United States, both of us attach different weights to the different aspects of our relationship with China. So for the United States, China is much more a systemic rival. The United States, as a hegemonic power, feels really threatened in its position in the world by China. If you look into polling data, China is perceived by the general public as the biggest threat of our time. And there is little Democrats and Republicans currently agree upon in the US, but on China they do. They perceive China as a huge threat and follow or pursue a pretty aggressive policy towards China. So in this triangle of partner, competitor and systemic rival, the US is very strong on the systemic rival front. If you look into the EU, and yes, there are also differences between EU member states, I would say there is still a little bit more of an emphasis on partner and competitor. And this comes down to how we perceive risks, but also that we have never been a hegemonic power and do not feel as threatened in our position in the world by China. But also because we are so heavily invested by China and very, very dependent economically on China. So our position is also a slightly different one. The US would say, well, because you are so dependent, you should perceive a bigger risk and do something about this. And also drawing the analogy with Russia, but many people are still saying in Germany and in the EU, well, it is a big market and you can’t push China off the edge of the world. It is going to be here, so we have to deal with this country and we will not be able to sustain our prosperity and well-being without that market because no other market around the world can substitute for what we have there. So Germany has a new China strategy. We also have a new national security strategy, the EU has a China strategy, and in that strategy you see that there is also somewhat of a mind shift going more from perception of a partner to a systemic rival, but we are still not at the same level as the United States are. But regarding the instruments, we are looking at the same instruments. We are looking at how can we diversify, where are other markets, both for importing from China inputs, but also export markets. Where could be new partners? How can we conclude trade agreements with those partners? But also, do we have to think about our trade routes? Do we have to go other routes, build in redundancies? Maybe we do have to do some stockpiling on very essential high security issues. Maybe we also need to be a little bit more careful of which investment we let into our country, into which sectors. Maybe we also have to take a look at into which sectors our companies are investing abroad. It is a fine line between too much government interventionism and too little, too much leaving the markets alone and not doing enough about markets. So right now, I think we are in the process of trying to find the right answer, which is really not easy. Decoupling is certainly not the answer, but how does de-risking, what both the EU and also the Biden administration want, how does this exactly look like? Who has which responsibility for what? How much market do we want? How much state do we want? How much protection do we want? How much protectionism? How much globalism, multilateralism, bilateralism? How much do we want to reshore? How much do we still want to depend on global value chains? I could, Moritz, I could go on with those questions.
LUDWIG:
Yeah, lots of open questions!
MILDNER:
It’s really, really hard for policy makers right now to find the right balance.
LUDWIG:
I bet.
MILDNER:
And well, the answers aren’t there yet.
LUDWIG:
Yeah, I could keep on talking with you. We covered so many topics. We started with the transatlantic partnership. We went over trade, the IRA. We went over China now in the end, and you definitely made me a little trade nerd myself, I would say. And yeah, we might actually talk a little bit more about this after this recording, but I’m so afraid we’re reaching the end of the podcast. So, thank you so much for taking the time and for sharing all of these insights with us.
MILDNER:
Well, thanks so much for having me! And there are never enough trade nerds around in the world, so, join us!
LUDWIG:
Perfect. So, make sure to check out the German Aspen Institute’s outstanding work and to follow Stormy on LinkedIn as well to stay connected with the current transatlantic dialogue. Thanks for tuning in and see you again!
[Outro]
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