Transatlantic Trade from Embedded Liberalism to Competitive Strategic Autonomy

Transatlantic trade relations developed after the Second World War through a compromise between embedded liberalism, which enabled an international division of labour, and domestic policy autonomy. This compromise depended on the capacity of the United States and Europe to regulate cross-border capital flows. As capital movements expanded and eventually overshadowed trade flows, the Atlantic partners shifted away from embedded liberalism to manage a more globalized economy. They sought to deepen the international division of labour through both finance and trade while avoiding a race to the bottom in welfare, labour and environmental standards. However, as globalization advanced, it became harder for the transatlantic partners to govern. Emerging economies challenged their influence over global economic institutions and their ability to set international standards. Losing control over globalization also generated domestic pressures, as interdependence produced dislocation and discontent. These dynamics fuelled a politics increasingly centred on domestic priorities rather than international engagement. Donald Trump reflects an extreme form of this trend, although it is visible on both sides of the Atlantic. Today, leaders are more inclined to pursue strategic autonomy even at the expense of cooperation. While the Atlantic economy is unlikely to break apart, it is more likely to muddle through than advance. Keywords: embedded liberalism; interdependence; globalization; strategic autonomy; populism.