The postwar division of Europe is slowly eroding. This is partly a consequence of the thaw in relations between Washington and Moscow. But it would not be possible without the powerful influence of a resurgent and increasingly self-confident European Community. The West Europeans themselves have become the engineers and chief architects reshaping Europe, with economic forces driving the process. The growing unity and prosperity of the EC exert a magnetic force on Eastern Europe, setting in train a process by which the two halves of the continent are steadily reducing barriers to the movement of goods, ideas and people—and largely on terms that support Western values and interests.

The future shape of Europe will depend heavily on whether the Community can achieve sufficient cohesion and prosperity in the next decade to accomplish two tasks: first, to generate centrifugal forces in Eastern Europe strong enough to draw reform-minded nations there more closely into its economic and political orbit, but without threatening Moscow to the point that it intervenes to reverse the process; second, to create centripetal forces in Western Europe strong enough that the West Germans will see any future association between their country and East Germany as taking place in a Community context. If it can achieve these objectives, the EC, by virtue of its moral, political and social—as well as economic—strength, will be well positioned to form the centerpiece around which any future "common European home" will be built, and become the chief arbiter of its rules.

Inevitably, U.S.-European relations will be altered as the West Europeans seek to reduce their political dependence on Washington, as tensions with the Soviets ease and as progress is made in rolling back the division of the continent. For much of the postwar period the perception of a major Soviet threat served as the cementing force for NATO and as a basis to rally popular support in the West for large expenditures on sophisticated weaponry. That same threat also constituted a compelling argument for reaching compromises between the United States and Western Europe on potentially divisive trade and monetary issues in order to preserve alliance unity.

In the years ahead, Western Europe can be expected to explore actively what it sees as dramatic new political possibilities in Eastern Europe and the U.S.S.R. that were unavailable in the past due to its own lack of coherence and Soviet intransigence. Western Europe will also assert more boldly its international commercial interests and demonstrate its independence of the United States on a number of foreign policy issues. NATO relationships are bound to come under greater scrutiny. Already Western Europe insists on a stronger voice in allied security affairs, and it will continue to do so in the future.

Washington will be increasingly uncomfortable with the challenges that Western Europe's more independent posture poses to its leadership. But in the final analysis the Community's growing unity can be an enormous asset for the United States if a new basis for cooperation between America and Europe on economic and defense matters can be found. The future shape of Atlantic relations will depend heavily on whether the United States can accommodate Western Europe's desire for greater independence of economic and political action and for significant progress in reducing East-West tension on the continent. It will equally depend on whether Western Europe can accommodate America's desire for Western Europe to assume a greater portion of responsibility for its own defense and more actively promote the well-being of the global economy. Under such a formula the United States would still be the indispensible leader of the West, but would have to find ways to build consensus rather than force it, and be willing to accept power-sharing as the natural handmaiden of burden-sharing.

The current environment of progress and optimism in Europe is, however, vulnerable to three potential threats. The first is a major blowup in Eastern Europe or one of the Baltic states, ignited by an outburst of nationalism or intense dissatisfaction with economic conditions. That could thwart arms control negotiations, cause an abrupt hardening of Soviet attitudes toward normalization with the West and undermine both glasnost and perestroika. Internal developments in the Soviet Union, similar to those in China this year which challenged the very authority of the Communist Party itself, could have similar effects, leading to a reversal of President Mikhail Gorbachev's policies or causing his removal.

The second threat is a turn toward protectionism by either the European Community or the United States; that would severely weaken Western economic cooperation and strengthen pressures for unilateral action on economic and political, as well as security, matters.

The third is a global recession, which could prompt weaker West European companies to seek a slowdown or halt in the removal of internal barriers associated with achieving the 1992 goal of a single market. A world recession would also deal a serious blow to exports of socialist nations, whose economies are already in a precarious situation, further jeopardizing their stability.

In this period of dramatic change, West Europeans and Americans will constantly need to remind themselves that, although their policies are likely to diverge increasingly on a greater number of issues, a fundamental and durable source of their international economic and political influence—and certainly of their security in what is still a highly uncertain, if improving, global environment—is their close relationship with one another. Societies on both sides of the Atlantic will need to keep that point in sharp focus lest the forces of change obscure it.

II

Western Europe is now challenged by its own postwar success. It is moving energetically to tear down, by the end of 1992, internal barriers to the movement of goods, people, capital and services—a process that many regard as establishing the basis for greater West European political unity and a more clearly defined European voice in international affairs.

Europe's course of action over the next decade will be significantly influenced by its international economic possibilities. European prosperity is inextricably intertwined with that of the United States and other major trading nations outside Europe. Expanding trade within the European Community will clearly be the most important stimulus to European growth. Trade will also grow with the nations of the European Free Trade Association (EFTA)—Finland, Sweden, Norway, Switzerland, Austria and Iceland—which together form what is by far the EC's largest trading partner. And there will doubtless be benefits in expanding trade with Eastern Europe, as part of the political and economic normalization process now under way with that region. The United States, however, will remain the most important offshore commercial and financial partner of Western Europe. And the Far East will be both a formidable competitor and a growing market for European goods. Alliances with American, Asian and other European companies will grow as these firms invest heavily in the EC in anticipation of 1992, and as EC firms seek to team up with them to build economies of scale, engage in cooperative research to share costs and position themselves quickly to deliver newly developed products to global markets.

Thus, while Western Europe strengthens its internal economic unity, the importance of its links with the rest of the world will limit any tendency to turn inward. The ultimate test of the Community's economic reforms will be their success in helping its companies to better meet foreign competition in an open global economy—not to insulate them from it—and in putting those companies in a position to negotiate alliances with large foreign firms on an equal footing.

Another constraint on Europe's future is internal. A unified West European economy will require a strong intra-European political consensus. It cannot sweep aside the need for bargains among its independent sovereign states; in that regard, the analogy of a "United States of Europe" is flawed. The 13 original American states did not embody distinctly separate nationalities with ancient languages, cultures, histories and institutions. The nations of Europe do. Such distinctions remain important, although they have not stood in the way of progress and need not inhibit it in the future. But further progress in tearing down internal economic impediments will depend more on how credible the process seems to the electorates of individual nations than on whether the idea conforms to a particular economic or bureaucratic model, however ideal.

A broad political consensus will be required to sustain the momentum of integration, particularly if those interests that are adversely affected by additional internal competition or increased mobility of labor try to derail or slow the process. Technicians can take the process only so far, but political support can no longer be bought by subsidies or protection. Membership in the Community means that each nation has agreed to take a broader vision of its interests and to relinquish the use of these tools in relations with its neighbors. Years of attempting to preserve fragmented, protected and highly regulated national economies have led to competitive weakness and high unemployment in Europe, while Canada, Japan and the United States have surged technologically and succeeded in generating millions of new jobs.

Virtually all else that Western Europe hopes to accomplish over the rest of this century at home and abroad will depend on its success in building a unified and more efficient single market that generates new jobs, accelerates social progress and enables Europeans to engage more fully in the global technological revolution. This would also establish a stronger basis for Western Europe to assume a greater role in its own defense and to aid reform in Eastern Europe. This process will be particularly important to retain and enhance the tight integration of West Germany with the rest of Western Europe.

For all these reasons, the cohesion that Western Europe seeks also serves America's interests—a point underscored by President Bush when, on his visit to Leiden in mid-July, he stated that "a stronger Europe, a more united Europe, is good for my country. And it is a development to be welcomed, a natural evolution within an alliance, the product of true partnership, 40 years in the making."

III

Establishing a well-functioning single internal market by 1992 will hardly be a smooth process. But whether it is achieved by then or not until the year 2000 is not a crucial issue. The process of tearing down internal barriers is well and wisely under way; it may slow from time to time in coming years, but it can only be reversed at great cost. By the end of this century, if all goes reasonably according to plan, Western Europe will be a far more efficient economic entity than it is today—with a larger number of world-class companies capable of going head-to-head with competitors abroad. These companies will not necessarily be exclusively European in ownership or location, but the European components are likely to be in a stronger position in global corporate alliances owing to the single market.

Within Europe it is inevitable that more power and influence will shift from national capitals to European Community institutions. This will involve a transfer of a measure of sovereignty, but world economic conditions—specifically, the rapid rise in global economic interdependence and an even higher degree of interdependence within Western Europe—already imply a diminution of sovereignty. Governments cannot hope to promote prosperity at home in isolation. The fundamental economic goals of West European nations now must be attained by pooling their efforts in the context of the Community. Specific or short-term national objectives will need to be suppressed to accomplish longer-term objectives of scale, efficiency and stable growth.

Over time the European Commission will assume a greater regulatory role on issues relating to mergers, the environment, government subsidies and so forth. But as it does, it will come under greater scrutiny by the Council of Ministers, composed of ministers of national governments, and the European Parliament, directly elected by voters in member nations. The council and parliament will, like national governments, constantly debate whether Western Europe should structure its integrated economy along socialist, social democratic, liberal or conservative lines. But the worst examples of government regulation at the national level—which were enacted when heavy regulation was fashionable and have survived through inertia even as their costs have become increasingly burdensome—are not likely to be replicated as Europe creates new rules from a fresh start. Political leaders, with Prime Minister Margaret Thatcher in the lead, are likely to ensure that as the commission assumes more power it does not replicate the mistakes of national governments, and indeed the commission itself generally shows no signs of doing this. But the Community will probably put in place regulations that provide generous minimum benefits for workers, implement strong environmental standards and actively protect consumers. Although measures in these areas are likely to be less market-oriented than those in the United States, they will reflect social considerations deemed by many Europeans to be important dimensions of the new Europe.

One particularly controversial idea is that of creating a European central bank. It is favored by those who see it as further tying Europe together economically and believe that the decision to eliminate capital controls by all members of the Community by 1992 requires a central bank to manage monetary policy. They also assert that over time a common currency, under a European central bank, will be required to avoid trade distortions that result from exchange rate fluctuations to which Western Europe would be vulnerable if it retained separate currencies.

Creating a central bank and a common currency will be difficult, however. One frequently cited model is the U.S. Federal Reserve. But the Federal Reserve makes decisions based on inputs from regional governors, who have considerable influence, and is responsive (although not beholden to) a nationwide political and financial constituency. In Europe today, monetary policy and the European Monetary System are heavily influenced by, and indeed borrow credibility from, the highly regarded anti-inflationary policy of the German Bundesbank—with other nations following along to varying degrees. To be successful a new system will have to retain a similar level of credibility, while also commanding legitimacy in all 12 EC nations, most of which are unaccustomed to their central bank's having the same degree of power as does the Bundesbank and maintaining a similarly rigorous monetary policy. Unless it enjoys market credibility and popular support from Dublin to Rome—as well as in Frankfurt—a European central bank would find it difficult to operate without excessive intervention by political forces.

In the next decade it is likely that the European Community will create a central bank roughly equivalent in structure to the U.S. Federal Reserve System, but with more limited powers. EC Commission President Jacques Delors has put forward a creative and comprehensive blueprint for a new European monetary system. Whether his propositions are adopted in whole or in part, intensified monetary cooperation within Europe is likely. At the Madrid summit of the EC leaders in June, significant steps were taken to this end. Over time the European Currency Unit will be utilized more extensively for denominating commercial transactions and financing governments, private corporations and entities such as the European Development Fund. The ECU will at a minimum become a parallel currency within the Community, although by 2000 it probably will not have displaced national currencies.

Nevertheless, as the ECU's role in global financial and monetary affairs becomes more prevalent and substantial, it will have profound effects on the international monetary system, thereby requiring the United States and other countries in the Group of Seven to consider whether changes in that system are required. Indeed, it would be wise to begin studying possible reforms of the international monetary system in parallel with the EC's exercise to reform its internal system. Future reforms in the international monetary system will need to reflect changes in the European Monetary System.

By design and by the sheer magnetism of its economic pull, the Community—in its own right and as the result of a panoply of new trade arrangements that it is likely to negotiate (as described in the next section)—will become an increasingly formidable trading force in the remainder of the century, and will be able to use access to its market as a powerful lever to obtain access for its products to other world markets.

Up to a point, utilizing economic strength to obtain trading advantages is a legitimate tactic. But used in excess, it would lead to conflict between Western Europe and its key trading partners—particularly the United States. That in turn could weaken NATO security ties if Americans—alarmed by threats to their commercial interests—insist that Washington threaten to withdraw troops from Western Europe in retaliation or to force concessions from the Community.

The current Uruguay Round of multilateral trade negotiations is, in this respect, of critical importance. An earlier negotiating round, the Kennedy Round, was launched at the beginning of the 1960s to reduce tariffs around the world, largely to keep the newly formed European Economic Community from turning inward. The current round can do likewise if its major players—the United States, Japan, the EC, Canada, Australia and a number of major Third World nations—are willing collectively to commit themselves to reduce myriad nontariff barriers now distorting international commerce.

For the EC this means negotiating agreements that open more of its industries to competition from outside (in return, of course, for similar measures by its trading partners), just as those industries also are being exposed to intensified competition from within Europe, due to a lowering of internal barriers in the 1992 process. Those EC industries accustomed to high levels of protection or government subsidy will likely resist. EC governments might be tempted to respond to pleas for help from industries being hurt by increased competition from within Europe by declining to open further to non-EC competition, e.g., resisting pressure to liberalize access to their government procurement markets, or by shielding industries temporarily from imports of non-European goods through tight transition measures.

If Europe is perceived by Americans as resisting progress in the Uruguay Round or creating new barriers to outside competition, Washington will find itself besieged by domestic pressures to take trade measures against Europe-even if for broader political or security reasons it wishes not to do so. Perception of a "bloc mentality" emerging in the Community would also give impetus to the creation of competing trading blocs—in the western hemisphere or among nations on the Pacific rim. Even though such units would probably be less formally organized than the Community, they could constrain Western Europe's global trading opportunities.

A similar type of danger would result from the overly aggressive use by Washington of provisions of the 1988 Omnibus Trade Act. That could drive the Community to impose new restrictions of its own in retaliation, and generate pressures for the EC to utilize its growing economic cohesion to counter American pressure. The net result could be that trade disputes would drive a wedge between Europe and America on political and security matters. It is likely, however, that during the 1990s Europe and the United States will reach understandings that put most major trade differences behind them or at least permit them to be resolved in an orderly fashion.

IV

In coming years the Community, which already has trade agreements with many of its neighbors, is likely to negotiate new agreements with a broader range of countries. While the Community is putting in place the directives and rules that together form the basis for the single market, it will not accept new members. After that, pressures on it to do so will grow; certainly Austria and Turkey will push hard. The risk perceived in the Community, however, is that the entrance of new members in the next several years could overburden the EC apparatus. There is resistance in some EC members to admission of low-wage countries on grounds that this would give unfettered access to low-cost goods, thereby costing them jobs and profits, and flood their economies with cheap labor.

There is also concern that applications for membership would force the Community to confront the question of whether inclusion of nations neutral by treaty or by long-standing policy would prevent the Community from ever becoming a political and security union as envisaged by the Treaty of Rome. Alternatively, the EC would have to work out arrangements so that neutrals such as Austria could join and cooperate fully on economic matters, while remaining outside of EC political and security collaboration.

By the end of this century there will probably not be many new full members in the Community. Far more numerous will be nations associated by bilateral arrangements of various types. Agreements are likely to be negotiated establishing free trade ties with EFTA neutrals such as Switzerland and Finland, as well as Austria if it is not permitted to join, and with Mediterranean countries such as Cyprus and Malta. These accords can also permit greater cooperation in areas such as investment, setting common product standards and adopting similar types of labor benefits. Still other arrangements—for instance with East European nations and possibly the U.S.S.R.—could lead to trade expansion and liberalization on a more limited scale. The net result will be a widening map of trade and economic ties in Europe, centered on the Community.

It might be possible to envisage by the end of this century a Europe of concentric economic circles: (1) the EC at the core; (2) several neutrals, and other nations in the Mediterranean, enjoying particularly close economic relations with, or associate membership in, the EC, along with frequent consultations with the Council of Ministers and European Parliament on a range of economic and political matters; (3) some East European nations, and perhaps even the U.S.S.R., having arrangements with the EC that permit substantially increased two-way trade, along with investment treaties to encourage new and joint ventures. Associate membership might also be possible for those whose reforms over time lead their economies to operate largely on the basis of market forces. This structure could form the basic architecture of the "common European home."

East-West trade is likely to remain a small percentage of total West European trade, even if new trade agreements are reached, but it can play an important role in supporting economic reforms in the Soviet bloc and reducing the dependence of a number of COMECON countries on the Soviet Union. For several years Western Europe will find it difficult to increase or even maintain its net exports to the United States, as the latter attempts to reduce its enormous trade deficit. Thus, increased exports to the East will be attractive for some EC industries, even if large-scale trade financing is required to support them.

In recent years America and Europe have frequently differed over the pace and character of improvements in economic relations with the Soviet Union. Effective Western management of East-West economic relations is likely to be especially important for harmony in the alliance in the decade ahead.

As the effort to normalize economic relations with socialist economies proceeds, the West must consider a pivotal question: On whose terms should that normalization take place? Because the West's approach to economic policy has succeeded and the East's has failed, arrangements that simply "split the difference" would be counterproductive. Extending large-scale credits to socialist nations, or allowing them to participate in global economic institutions, without evidence of significant reform on their part would be self-defeating.

The West's goal should be to draw the Soviets and the East Europeans over time into the network of international, market-oriented economic relationships in support of, and in parallel with, domestic economic reforms in those nations. And it should maintain a strong consensus on ways to avoid—through the COCOM group of Western nations constituted to control technology transfer—sales of technology that could potentially benefit the Soviet military. In a similar spirit it should agree to avoid the provision of subsidized credits to socialist nations.

Both President Bush and President Gorbachev have supported the goal of bringing the Soviet Union into the international economic system. Gorbachev dramatized this point in a letter to the Paris economic summit in July that stressed: "Our perestroika is inseparable from a policy aiming at our full participation in the world economy." Soviet membership in global institutions such as the General Agreement on Tariffs and Trade (GATT) and the World Bank/International Monetary Fund is inappropriate at the moment, largely because of the still heavy hand of government on, and virtual absence of effective market forces in, the Soviet economy. But there are various ways in which these institutions and Moscow might actively exchange information on developments in the Soviet economy and the global economy as well. This exchange could permit Soviet officials to understand better the practical consequences of normalizing economic and trade relations with the rest of the world and help the Western nations and others to understand better how the Soviets would perform as members or observers in international institutions.

Observer status in the GATT for the Soviet Union should be considered, but only after the conclusion of the Uruguay Round. Addressing this now would divert attention from the round's urgent negotiating goals. Consideration of Soviet observership, of course, assumes that the U.S.S.R.'s internal reforms continue. Granting observership need not imply a commitment to ultimate full membership, which should be decided separately. In the meantime an active and systematic exchange of information and an organized set of consultations should take place between GATT and Soviet trade experts. This would aim at helping the Soviets design a tariff and pricing system consistent with the process of normalizing trade relations with market economies, and at giving the Kremlin a chance to dispel fears in the West that it would use GATT membership or observer status to politicize the organization, as it has done with respect to trade issues in the United Nations.

The World Bank and the International Monetary Fund do not have the equivalent of GATT's observer status. But systematic consultations among their experts and those of the U.S.S.R. could permit those institutions to obtain more information on the Soviet economy and its financing needs, and enable Soviet reformers to avail themselves of these institutions' expertise on exchange rates, pricing, banking and credit issues. In both cases, closer contacts will help Soviet officials to determine how to adjust their policies and practices to participate more effectively in the world economy.

Western Europe can utilize its particular economic strengths and historical ties to draw individual nations of Eastern Europe gradually closer (recognizing the differences in their approach to economic reform) and away from economic dependence on Moscow, without threatening Soviet security relationships. Indeed, the Kremlin might find closer economic ties between Eastern and Western Europe to be a face-saving and practical way of reducing its own costly commitments and avoiding a blowup in the region due to economic dissatisfaction.

The Community's unique advantage in this respect was recognized at the Paris economic summit. Both West German Chancellor Kohl and President Bush supported giving the EC Commission the lead in coordinating efforts to assist reform in Eastern Europe and provide food aid to Poland. This action helped to "depoliticize" the aid from Moscow's standpoint, and made it easier for East Europeans to accept the help without appearing to the Kremlin to be slipping into America's clutches. It also enabled West Germany to play a key role in Eastern Europe within the context of the EC, countering concerns elsewhere that it might be tempted to take unilateral initiatives in the region, and reinforcing in the minds of West Germans the idea that improving ties with the East could be done in a Community framework.

On another front, member nations of the Community are gradually linking loans to, and trade with, their socialist neighbors to efforts to lower tensions and support reforms. Most West European trade and credits are not tied to political conditions, but some links have been made. In 1987 West German loans to Hungary were provided on the condition that liberal reforms continue and cultural contacts be permitted to grow. In 1988 the French government announced its intention to link its roughly $2 billion in new credits to the Soviet Union to progress in reducing conventional arms in Europe. Such conditions avoid the inconsistency of providing the Soviets large amounts of money while Moscow continues to maintain massive conventional forces that require offsetting Western defense spending. Also in 1988 the Community and COMECON signed a declaration of "mutual recognition." The Community insisted on and obtained two conditions—that West Berlin be treated as part of the EC, and that future trade agreements be with individual COMECON nations, not with the Moscow-dominated COMECON organization itself.

The latter condition was a step toward loosening Moscow's economic grip on Eastern Europe. Soon after, the Community reached a trade agreement with Hungary, thus rewarding Eastern Europe's most reform-minded and market-oriented economy; the EC promised to phase out most of its quotas against Hungary, which agreed to provide easier access for Community businesses. A more limited agreement was reached later with Czechoslovakia. The U.S.S.R., Poland and Bulgaria are seeking similar arrangements, but they are unlikely to receive as favorable treatment because their governments have tightly controlled prices. Without credible, market-oriented price mechanisms there is a greater chance that these nations will dump or heavily subsidize exports to the Community.

Thus, the Community approach to COMECON nations is dual track. It aims at helping individual nations of Eastern Europe regain their historical position as an integrated part of Europe in terms of trade, human rights, freedom of movement and democratic reforms. But they would not yet be included as members in the EC because their economies are not able to integrate fully with those of Western Europe and they do not adhere to market principles. Moreover, these countries are of course still members of the Warsaw Pact.

Over time, Poland, Hungary and Czechoslovakia should be able to resume, to the extent geopolitics will allow, their positions as integral parts of Europe. By culture, religion and history they can in no way be considered a logical part of the Soviet sphere of influence, much less of its empire. Ties between Paris and Warsaw, Vienna and Budapest, Prague and Berlin are as much a part of the common European background as are the Renaissance, the Reformation, Chopin, Voltaire and Beethoven. Thus, trying to bring the two parts of Europe closer together responds to a historical urge that both sides feel. The historical basis of a "whole Europe" or "common home," after all, goes back to the empire of Charlemagne, and then the Holy Roman Empire, and should at a minimum encompass the territories of those empires; both were culturally and geographically primarily West European.

V

There is an emerging debate in Europe over how it might assume more responsibility for its own security. One school of thought—advanced, among others, by members of the Social Democratic Party in West Germany and the Labour Party in Britain—holds that the Soviet Union and Western Europe can reconcile most of their ideological and political differences very quickly. This line opposes new expenditures for nuclear weaponry and supports significantly intensified East-West trade and financial relations. It argues that improved East-West ties will make it possible to achieve Charles de Gaulle's dream of a Europe from the Atlantic to the Urals, or at a minimum to tear down barriers to the movement of people and dramatically reduce tensions. Western Europe, the argument continues, should loosen its military and political links to the United States—which are seen as an abnormal legacy of the cold war—and "Europeanize" Western Europe's security. An extreme version of this argument holds that Western Europe should quickly denuclearize and distance itself from Washington on security matters in order to hasten the process of intra-European normalization.

Another, more centrist, school advances a very different vision. It is one of a Western Europe that, while asserting more control over its own economic and political future and pursuing closer economic and political ties with the East, as well as freer movement of people to and from its socialist neighbors, remains firmly a part of the Atlantic alliance and militarily well prepared, with a credible nuclear deterrent. This vision is based on the view that NATO's unity and its defense capability must be preserved even as relations with the Soviets improve, that Western strength and NATO cohesion are in fact a prerequisite for success in future arms reduction talks with Moscow, and that they are in any case needed because the long-term outlook for Soviet policy is still unclear. Moreover, the argument continues, the alliance provides Western Europe the protection that enables it to concentrate on strengthening its internal economic cohesion.

The concept of Europe that will emerge will not be the product of an American vision but of forces within Europe itself. Yet the stakes for the United States are high. America's international power and influence are heavily dependent on its alliances with Western Europe as well as Japan. But American policy cannot be predicated on the assumption that the postwar status quo will last indefinitely, that Western Europe will accept permanent animosity with the U.S.S.R. or permanent barriers with Eastern Europe, or that America's allies will not increasingly seek to assert their self-identity and moral independence in international affairs—often in ways that differentiate them from the United States.

Nonetheless, global stability continues to depend heavily on the United States. Washington and its allies must find the proper balance between America's efforts to reduce its costly global role, while still being able to lead the alliance effectively, and Western Europe's efforts to play a more independent global role, while continuing to rely on U.S. ground forces and its nuclear deterrent. On both sides of the Atlantic leaders recognize that no country today possesses America's combination of military power, wealth and political authority; none can play the role of "replacement power" should America's global influence weaken significantly, as America did when Britain's power declined earlier in this century.

Western Europe's strategic options are limited by global power relationships. Western Europe confronts a military superpower to its east. As long as Europe is not a military superpower (even if it is an economic one), it must depend on the world's other superpower, its ally the United States, to counter Soviet influence and Soviet bloc armies. Some Soviet threat will remain, notwithstanding Gorbachev's encouraging announcements of unilateral force cuts in Eastern Europe and his willingness to negotiate substantial additional cuts, as long as Soviet military forces remain large and offensively postured and Moscow's political and military domination continues in Eastern Europe. As long as there is a potential threat of Soviet intimidation, America's defense commitment and its military presence will remain vital to Western Europe's security and to its ability to resist pressures from Moscow.

Nevertheless, a new political consensus will be required to underpin Western security relationships. NATO has long had to live with the facts of democratic life: when relations with the Soviets improve, citizens of NATO nations become reluctant to support military expenditures and question the need for the alliance to possess major deterrent capabilities. It is difficult to rally people around a pastel banner. Increasingly NATO governments will have to ensure that public support for the organization depends on more than the perception of an imminent Soviet threat. They will need both to underscore the need for NATO as insurance against a reversal of Soviet policy and to expand the range of issues on which NATO engages the common efforts of the European and North American democracies—from student exchanges, to fighting the drug trade, to resisting terrorism, to countering threats to the environment. All of these will take on greater importance in the 1990s. By moving effectively in at least a few of these areas, NATO can increase its relevance to younger generations, to whom the importance of support for NATO is not as obvious as it is to those whose political views were formed at the height of the cold war.

As fear of the Soviets has declined, so has popular support for NATO and for maintaining current nuclear arsenals. Antinuclear sentiment is particularly strong in West Germany. Much of Gorbachev's public relations campaign is an effort to loosen the Federal Republic's ties to the alliance (although not necessarily to encourage it to leave NATO, since that would intensify pressure on East Germany to leave the Warsaw Pact). Without strong Federal Republic support, NATO's conventional defense and nuclear deterrent would be ineffective—and Moscow fully understands this.

West Germany's role as a NATO ally is particularly vital to the balance of power on the European continent and to the West's ability to exert influence in central Europe. Therefore, the United States and its allies will have to address the deeply felt unease in the Federal Republic regarding Germany's status as a divided nation and the increasing discomfort of West Germans at being constrained from pursuing social, political and economic objectives in areas of Eastern Europe where they have historically been influential.

The "German question" will loom larger and larger in the years ahead. While German reunification is highly unlikely in the foreseeable future, some type of association between the two German states will be a major goal of new generations of West Germans—and perhaps East Germans as well. At a minimum, there will be greater movement of people between the Germanys and greater benefits for East Germany (which now enjoys free trade with the Community) as the single market evolves.

For the Community the major goal will be to strengthen its interlocking trade and financial ties with West Germany—leading to greater political and security cohesion—to anchor the Federal Republic firmly to the West, countering any tendency for it to seek a Bismarckian "middle ground" in central Europe. Prosperity in the EC, in contrast to the failures of socialism in Eastern Europe, should serve as a reminder to both Germanys that their brightest future together lies in East Germany's moving gradually toward West Germany, where prosperity and social progress are enhanced by membership in the EC.

France is especially cognizant of the need for close links with Germany, and between Germany and the rest of Western Europe. The need for close cooperation between Paris and Bonn, dramatized in the public reconciliation between France and Germany ratified by President de Gaulle and Chancellor Konrad Adenauer in 1962 at Reims Cathedral, has been carried on enthusiastically by the present French and German leaders; the two countries are still the driving force for reducing internal barriers in the Community, creating a common monetary system and forging closer military ties. France, having translated its passionate sense of national destiny into an almost equally passionate sense of European destiny, is the spiritual leader of the new Europe while West Germany is the economic leader.

VI

Differences in the approach of Western Europe and the United States concerning the improvement of economic ties with Eastern Europe are to be expected, and indeed are in many respects appropriate due to circumstances of history and geography; but any change in security relationships between East and West will require a clear agreement within NATO. Strategic stability on the continent cannot be attained if Americans and West Europeans pursue separate strategies.

Here as in economics, the central question is: On whose terms? Some Europeans argue that greater accommodation with Moscow is prudent "hedging" policy. Still others argue on moral grounds for unilaterally moving toward a nuclear-free Western Europe. But these notions, if broadly embraced, risk acceptance of the idea that more normal relations in Europe must be achieved to a substantial degree on Moscow's terms. The opposite proposition is more accurate. Western democracies will be in a powerful position vis-à-vis Moscow for years to come. The Soviet Union and its allies need a respite from international tensions in order to achieve domestic economic priorities.

President Bush made the the most of these circumstances by taking the initiative at the 1989 NATO summit to offer proposals aimed at lowering Warsaw Pact and NATO force levels. In many respects the summit was a watershed, for it took the United States and its allies off the defensive in the "initiative competition" with Gorbachev, and demonstrated NATO's resolve to link large conventional cuts to cuts in short-range nuclear weapons. It also, temporarily at least, diffused pressure in the U.S. Congress for unilateral conventional force cuts in Europe.

One particular area in which the allies will need to coordinate more actively is arms control. Europeans are apprehensive not only when America becomes too belligerent toward Moscow, but also when it appears too eager to reach agreement. Toughness stirs up apprehensions about nuclear war and gives ammunition to antinuclear groups; arms reduction negotiations raise apprehensions over possible decoupling of the U.S defense commitment from Europe. America's allies, including Japan, need to be brought into a NATO-centered process of consultations on arms control strategy—which in coming years will involve negotiations on strategic, conventional and perhaps short-range nuclear arms—both to minimize misunderstandings that breed apprehensions and to ensure that progress on one side of the Eurasian landmass does not add to problems on the other.

The West's primary negotiating goal now should be to press Gorbachev to make good on his own concepts of "reasonable sufficiency" and "defensive" military doctrine. It should seek a dismantling of a large portion of Soviet conventional forces and equipment that are forward-deployed in Eastern Europe and western military districts of the Soviet Union. Asymmetrical cuts in conventional forces should, as the United States has suggested, be a prerequisite for cuts in short-range nuclear weapons. The latter weapons would then not be required in such great abundance by NATO because conventional cuts would make the Warsaw Pact far less able to launch a surprise attack and engage in massive offensive operations. If that goal can be attained, and if effective verification procedures can be established, the end of the century could see a dramatic reduction of tensions and lower-cost security in Europe.

Assuming a reduction of East-West tensions and asymmetrical conventional force cuts, fewer American divisions will be required on the continent—and therefore one or two of the five U.S. divisions there could be withdrawn as the result of an intra-NATO agreement, with little risk to West European security or NATO cohesion. It is also likely that the nuclear deterrent capabilities of Britain and France will be enhanced by that time—a possibility that neither the United States nor Western Europe should negotiate away. There is likely to be closer nuclear cooperation between Britain and France, as well as expanded coordination between their nuclear force planners and the commanders of conventional forces in West Germany. Over time this should give the Germans greater confidence in the credibility of these deterrents as a supplement to those of the United States. Improvements in intra-West European military cooperation will also demonstrate to Americans that Europeans are doing more for themselves. But at the end of this century there will still be no alternative to an American nuclear guarantee and troop presence in Europe.

If conventional troop negotiations achieve satisfactory results, and economic relations between the EC and its eastern neighbors improve as expected, the United States and its European allies should be prepared to go further: to explore opportunities for new security arrangements with the Soviet Union that will permit governments to come to power in Eastern Europe whose legitimacy is based on genuine voter support and which are closely associated with the Community (the second concentric circle around the EC core, described earlier), although they could remain in COMECON as well. A zone of this sort on its western border might become an increasingly attractive prospect for Moscow. But the United States and its European allies will have to reach a consensus on these issues before approaching the U.S.S.R. and the East Europeans. Community leadership of the dialogue with the East Europeans, and even with the U.S.S.R.—consistent with the approach set at the Paris summit on economic aid to Eastern Europe—might provide greater reassurance to both than if the United States were to seem to dominate the process. It would also alleviate any concerns about a "Yalta II" agreement made over the heads of the Europeans. The Community should be one of the guarantors of the integrity of the agreement, though in the end the role of the United States will be decisive for Moscow.

One caveat must be noted. A backlash in the U.S.S.R. is still possible that could significantly retard or even reverse the process of glasnost and perestroika. If this occurs, Moscow's more relaxed attitude toward both economic and political reform in Eastern Europe could suffer. The West will need to be alert to such contingencies, even though optimism now reigns. Division within Western Europe, or between it and America, over how to react to abrupt and adverse change in the U.S.S.R. can be limited by anticipating such developments, at least as possibilities, and consulting closely about how they might be coped with.

VII

In these and other areas, the United States will need to work not only with individual West European nations as it has, but also with the European Community—which will likely be the forum for its members to harmonize foreign policy on an ever larger range of issues. More frequent discussion between the U.S. secretary of state and foreign ministers of a representative group of EC members (perhaps the foreign minister of the nation holding the EC presidency, plus the foreign ministers of the countries preceding and succeeding in the EC presidency) might be useful—and relations with Eastern Europe and the U.S.S.R. are an apt subject for such discussion. The Europeans will want these consultations to represent something more than a symbolic act; they will want to be listened to and to feel confident that America's position gives their collective views appropriate weight. And, as in the case of economic support for Eastern Europe, they will insist on being in the lead on important subjects.

In the era of John F. Kennedy there was an expectation on both sides of the Atlantic that NATO could become a partnership of equals. This was also a vision of Jean Monnet and Paul Henri Spaak—two fathers of today's Europe. This goal is not likely to be realized by 2000, but a far greater parity is. Western Europe will not over this period become a military superpower or possess a fully credible nuclear deterrent, nor will it be prepared to exercise a global political role of a scope similar to America's. But it can and will be a powerful global economic force. It will also have forged a more distinctly European set of policies and attitudes on global political issues.

The character of the Atlantic relationship will depend heavily on whether America and Europe together can find the right formula for accommodating Europe's desire for greater autonomy and influence on global and alliance issues, along with America's desire for Europe to assume greater responsibility for its defense and for global economic stability. If such an accommodation can be reached, the process of normalization between Western and Eastern Europe can proceed without weakening Western security, and the Community's growing unity will provide the most powerful boost to the fortunes of the West and to democratic values in this century. By the year 2000 the continent should be a safer and more prosperous place.

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  • Robert D. Hormats is Vice Chairman, Goldman Sachs International. He was Assistant Secretary of State for Economic and Business Affairs in 1981 and 1982, Deputy U.S. Trade Representative from 1978 to 1981, and Senior Staff Member for International Economic Affairs on the National Security Council staff in the early 1970s.
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