Mutualism: The right path to de-risk our collective future

In recent months, I’ve spent significant time talking with business and government leaders worldwide about the current state of relations between Europe, China, and the U.S.

Whether it’s been in Berlin, Shanghai, Beijing, Washington D.C., or other cities, these leaders had one big question: How do we balance our positions to de-risk and refuel for the future?

Because the world has gotten a lot more complex since the pandemic. As a result, multinational companies and countries are reviewing what they make themselves and how they source from others. On the one hand, they want to strengthen their supply security in strategic markets such as health and electronics. And on the other hand, they want to maintain their trading relationships with external partners who are better at making and supplying than themselves.

De-risking is all about finding the right balance. Yet that’s easier said than done when you need to collaborate with others who are not only your friends but also competitors and potentially strategic rivals. In some instances, this uncertainty about how to define relationships results in a breakdown of trust. And that leads to some proposing to decouple key strategic markets between East and West.

In my view, bloc building will pose a significant risk to global stability and economic security. The science and technologies now driving economic growth have become so specialized and interconnected that no one can master everything. This complexity means that any decoupling would take decades and carry an unimaginable financial cost.

And for what benefit?

Globalization isn’t perfect. But it’s our best path forward. The free flow of goods across borders worldwide unleashes value most efficiently and effectively. The EU, China, and the U.S. are the world’s largest trading partners. No one else comes close. Trade between the U.S. and China hit a record high of $690 billion in 2022. And China is the largest partner for E.U. imports. Each has its unique competitive advantages. There is tremendous strength in this global diversity.

Yet the pandemic and the war in Ukraine reminded us of the risks of becoming too dependent on any source within your global supply chain. That’s why most leading countries are rapidly increasing investments within vital strategic areas, such as the active ingredients used in essential medicines. But again, what’s the right balance between risk and reward?

That’s why I’ve been eagerly anticipating the release last week of Germany’s first Federal Government Strategy on China. Launching this Strategy, which came on the 50th anniversary of bilateral relations between Germany and China, was timely and necessary. I believe it will help set the tone for future trade between these two nations and influence how other bilateral and multi-lateral relationships evolve over the coming years and decades. The German Chancellor and his government nailed it. Their Strategy is both constructive and prudent. It addressed vital facets of the bilateral relationship between Germany and China while highlighting its interconnectedness with the other European, transatlantic, and global policies that underpin international trade.

Germany has approached the idea of de-risking in much the same way as diversified global companies like Merck Group . Across our three business sectors and 66 countries, we constantly analyze and manage the risks we see and take. Behind every decision is our goal to increase proximity to customers and patients and become more responsive to their emerging needs. By further localizing our supply chains in areas where it’s financially attractive, we become faster, more efficient, and more sustainable. That’s why we at Merck are investing capital across our global footprint to increase supply security and strengthen our competitive position.

I also commend Germany for creating a Strategy with China that is about much more than supply chain security. For one, they recognized our fundamental differences.

Because China’s political and economic systems are very different, the E.U. and the U.S. are multi-party democracies, while China is a single party. Market forces drive Western economies, while the state drives China. Such differences, which have evolved over centuries, form the bedrock of their respective cultures and shape their geopolitical views.

We must be factual about these differences. And make no mistake. For the E.U. and the U.S., these differences make China a significant competitor. But that’s not necessarily a bad thing. As a business leader, I compare it to rival companies with different business models who compete against each other for market share. Rivalries and the occasional disagreement are inevitable. Yet so long as there is mutual respect and abidance to the rule of law, this dynamic environment is positive for the overall market. Competition stimulates innovation and boosts productivity.

However, it’s important to not only view our differences through a competitive lens. Because we also have a lot in common. The work ethics and capitalistic tendencies of the E.U., U.S., and China are remarkably similar. People desire a fair opportunity to live a healthy life and build prosperity. Most of us also care deeply about our neighbors and creating a sustainable future for current and future generations. These shared values and other areas of common interest represent the foundation stones for all future cooperation.

Let’s be clear: the next few decades will be critical for all of us. Viruses do not respect borders. Climate change is not a problem for individual countries. We must team up to meet such global challenges. We can overcome them only with a fully engaged and committed China by our side. That’s why I advocate for global cooperation and engaging with each other at every political, economic, and social level. Without such deep, sustained, and transparent engagement, we risk further degrading the one thing most important to building long-term collaborations – trust.

In this sense, the visit of Chancellor Scholz to China and the German Chinese government consultations in Berlin were crucial steps in building an even more trustful relationship. When we trust each other, we can address potential differences and challenges more effectively and uphold international standards for human rights.

The E.U., the U.S., and China have a complex and highly interconnected relationship. They can be competitive rivals, important suppliers, and collaboration partners. In nature, when different organisms form such a close relationship, the scientific term is symbiosis. And when an extremely close symbiotic bond forms, which is mutually beneficial for both organisms, it’s called mutualism.

Well-known examples of mutualism are flowers and bees, sharks and remora fish, and ants and aphids. Each organism is fundamentally different. Both could survive without the other. Yet they’ve found a better way of living and working together. That’s why I believe mutualism is the right way to consider the relationship between the E.U., the U.S., and China.

As a globally diversified innovation leader with a strong footprint, Merck will do everything in our hands to build this mutually beneficial global ecosystem. We believe in free trade and its benefits for communities and societies. And there is no alternative to free trade and no global world without China. Because by leveraging our differences, reducing dependencies when appropriate, and engaging closely with each other, our collective future can be stronger, safer, and healthier for all.