The launch of the euro offers the prospect of a new bipolar international economic order that could replace America's hegemony since World War II. The global trading system has already been jointly run since the early days of the European Common Market, which enabled Europe to integrate its commerce and exercise power equivalent to that of the United States in that domain. Now Euroland will equal or exceed the United States on every key measure of economic strength and will speak increasingly with a single voice on a wide array of economic issues. The euro is likely to challenge the international financial dominance of the dollar. Moreover, the end of the Cold War has sharply reduced the importance of U.S. military might for Europe and pulled aside the security blanket that often allowed both sides to cover up or resolve their economic disputes for the greater good of preserving the anticommunist alliance.
Economic relations between the United States and the European Union will therefore rest increasingly on a foundation of virtual equality. The United States will either have to adjust to this new reality or conduct a series of rear-guard defensive actions that will be increasingly futile and costly -- like the British did for many decades as their leadership role declined. The EU will either have to exercise positive leadership, which it now can do, or become highly frustrated at home and a spoiler abroad.
Partly as a result of these seismic shifts, transatlantic economic interdependence and joint responsibility for global leadership have grown rapidly for both economic superpowers. Europe and America therefore need to devise new strategies and institutional arrangements to manage both their bilateral economic relations and global economic issues. Such strategies can be constructed with or without a "common European foreign policy" that embraces traditional security issues; Europe itself has integrated far faster economically than it has politically. Japan will also be a partner in some elements of this collaboration. But until that country
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