The US-Europe transatlantic partnership is showing its resilience

President Biden’s trip to Europe last week not only highlighted NATO’s robust military foundation, it also underscored how the deep commercial ties that bind the two sides of the North Atlantic have become the resilient geoeconomic base from which the United States and its allies can address Putin’s threats and broader challenges of global disruption.  

Biden’s headline venture is a bold transatlantic pact to reduce Europe’s reliance on Russian energy and deploy clean technologies. The United States will work with other nations to increase liquefied natural gas (LNG) exports to Europe by at least 15 billion cubic meters this year — which will completely replace Russian LNG supplies to Europe — and to provide Europe with 50 billion cubic meters of LNG annually through at least 2030. Germany’s parallel announcement that it will cut its dependency on Russian oil by half by this summer, be independent of Russian coal by the fall and be nearly free of Russian gas by 2024 is perhaps an even more revolutionary turnaround for a country that had built up dangerous links to Russian energy and until just recently was actively building more. It won’t accomplish those aims without U.S. help.  

These initiatives underscore a new reality: the United States has stepped in to become Europe’s major partner as the continent weans itself off its energy dependence on Russia. In February, U.S. liquid natural gas supplies to Europe even outpaced Russia’s natural gas pipeline deliveries.   

The United States may not fully replace other suppliers for energy-starved Europe, but transatlantic energy connections are growing in importance — and they flow both ways. For instance, European companies, led by German firms, are the largest foreign investors in the U.S. energy economy. Companies on both sides of the North Atlantic are leading the transition to competitive clean technologies. U.S. companies in Europe have become a driving force for Europe’s green revolution, accounting for more than half of the long-term renewable energy purchase agreements in Europe since 2007. In the largest auction of offshore wind sites in U.S. history in February 2022, eight of the nine winning companies were European. 

Energy is a vivid yet not isolated example that the transatlantic economy is proving remarkably resilient to disruptions generated by Putin’s war on Ukraine, the pandemic, congested supply chains and energy price spikes.    

U.S.-European energy links are just one strand of a remarkably robust and vibrant transatlantic economy. The latest data reveal that in 2021 U.S.-EU trade in goods and services is estimated to have hit an all-time high of $1.3 trillion — 42 percent more than the EU’s trade with China. U.S. foreign direct investment flows to Europe surged to an all-time high of $253 billion and U.S. companies based in Europe are estimated to have earned a record-breaking $300 billion. European firms in the United States earned a record $162 billion, and European foreign direct investment flows into the United States surged to the highest levels since 2017, hitting an estimated $235 billion.   

Putin’s war is uncovering the impressive strength and resiliency of the transatlantic economy. North America and Europe are not only bound together through NATO, they can also use their geoeconomic base to isolate and punish Putin, address competitive challenges from China and capitalize on their deeply interconnected innovation links to make sure they remain global standard-setters.   

The deeply intertwined, $6 trillion transatlantic economy will be far better able to withstand the pain of sanctions than will the Russian economy. It is also the basis from which North America and Europe can address challenges emanating from China. U.S. companies in 2021 earned an estimated $300 billion from their operations in Europe — 23 times what they earned from operations in China. America’s asset base in Germany is more than double its assets in China. The total stock of U.S. foreign direct investment in Europe is 4 times more than U.S. investment in the entire Asia-Pacific, and Europe’s foreign direct investment stock in the U.S. is 3 times more than that of Asia. U.S. companies based in Ireland export 5 times more to the rest of the world than do U.S. companies based in China, and about 3.5 times more than U.S. firms based in Mexico. 

Transatlantic flows in research and development (R&D) are the most intense between any two international partners. In 2019 U.S. companies in Europe spent $32.5 billion on R&D, 56 percent of total R&D conducted globally by U.S. firms abroad. European enterprises account for two-thirds of all R&D expenditures by foreign companies in the United States. U.S. and European government budgets for energy research, development and demonstration of $19.1 billion in 2020 was more than double the amount spent in China. Transatlantic data flows are 55 percent greater than transpacific flows.   

Both sides of the Atlantic are also better positioned today because of important steps they have taken to reinvigorate their partnership. During the president’s trip, they reached an initial agreement on a new pact to regulate transfers of personal data across the Atlantic. They agreed to suspend mutual tariffs related to the ongoing Boeing-Airbus dispute and to lift U.S. tariffs on European steel and aluminum and countervailing European tariffs on U.S. goods. And they created a U.S.-EU Trade and Technology Council (TTC) to grow the bilateral trade, investment and technology relationship; avoid new unnecessary technical barriers to trade; facilitate regulatory cooperation and cooperate on international standards development. 

Policy differences remain, but now they are playing out in a context of transatlantic unity rather than division. There are bumps on the road to recovery, yet transatlantic partnership rebounded in 2021, is proving itself to be resilient in the face of new challenges and all indications are that it will forge ahead again in 2022.  

Daniel S. Hamilton is a senior nonresident fellow at the Brookings Institution and a senior fellow at Johns Hopkins University’s School of Advanced International Studies. Together with Joseph Quinlan, he is the author of “The Transatlantic Economy 2022,” from which these data are drawn.