Europe retaliates and the transatlantic split widens

US President Donald J. Trump meeting EU leaders
Source image via EPA

The European Union (EU) retaliatory tariffs on a series of American goods, including peanut butter, motorcycles, bourbon, orange juice, sweetcorn and others, kicked in on June 22. The imposed duties on American products are worth $3.3bn in a tit-for-tat response by Brussels to the Trump administration’s unilateral imposition of tariffs on aluminum (10%) and steel (25%) back on March 23.

The EU Trade Commissioner, Cecilia Malmstrom, said that “the rules of international trade, which we have developed over the years hand in hand with our American partners, cannot be violated without a reaction from our side.” She argued that the EU was “left with no other choice” to impose tariffs on US products. Jean-Claude Juncker, president of the European Commission, said that the decision by the US to impose tariffs “goes against all logic and history.” In addition to the immediate tariffs, the EU seized the World Trade Organization (WTO) to challenge the US measures.

The US under President Trump is not at its first spike of tariffs on targeted foreign goods based on national security ground. Aside from the steel and aluminum tariffs, the US imposed a 20-30% tariff on washing machines and solar panels last year. It is as well discussed to impose a 25% tariff on over 800 Chinese goods. Trump seems to believe that the world is taking advantage of the US and that free trade is not being fair to the US. His sole argument is based on the reading of the US trade balance. If there is a trade deficit, the US is losing; if there is a surplus, the US is winning. Trade policies are more complex than what it is being portrayed in a tweet. The world, in particular US allies, has already responded to US ensuing the tariffs on steel and aluminum as listed in the table below.

Screen Shot 2018-06-23 at 4.51.57 PM
Source: Amy Cheng, Humza Jilani, Keith Johnson, Amy Mackinnon. 2018. “State of the Trade Wars Tracking U.S. President Donald Trump’s tariffs — and the retaliatory measures other countries are taking.” Foreign Policy. June 21. (here)

Tariffs on auto imports?

In a very trumpian fashion, the American president went on on Friday by threatening to impose a 20% tariff on all U.S. imports of European Union-assembled cars. His message, via twitter, read “If these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!” The threat of imposing tariffs on cars is not new as a month ago he instructed the Department of Commerce, led by Wilbur Ross, to launch a probe into whether auto imports pose a national security threat.

Trump and his associates have used overtime the Section 232 of the Trade Expansion Act of 1962 in order to increase tariffs on ground of national security. The same rationale will potentially be used for tariffs on auto imports. The justification and connection between national security and tariffs was made by Wilbur Ross during a recent interview, wherein he said “National security is broadly defined to include the economy, to include the impact on employment, to include a very big variety of things.” He continued claiming that “Economic security is military security. And without economic security, you can’t have military security.” However, most of the tariffs are affecting traditional US allies, which happen to be NATO members and closely working on defense and security cooperation. Mr. Ross’s justification does hold any serious ground and is simply trying to hide basic protectionist policies being national security.

Congress could regain the control of decision-making on tariffs if the Republican establishment, holding the majority in the House and Senate, were committed to free trade and sound economic and trade policies. Earlier in June, republican and democrat lawmakers mentioned a plan to introduce a legislation that would force President Donald Trump to obtain Congress’ approval before imposing tariffs on national security grounds. Until the midterm elections, it is difficult to imagine the approval of such legislation by the Congress.

The current rates of tariffs for imports between the US and the EU are divided into two categories: for cars, 2.5% US import tax compared to 10% EU import tax; and for light trucks and SUVs: 25% US import tax compared to 10% EU import tax. The American president always focuses on the tariffs for cars and never on light trucks. He has been picking on Germany and its successful automobile industry. But he has failed to recognize the investments made by the three leading german companies in building assembly plants in South Carolina (BMW and Daimler), Alabama (Daimler), and Tennessee (Volkswagen). In 2017, 38% of 854,000 cars build in the US were sold in the US and over 500,000 were exported. With regards to employment, 116,500 jobs in US were connected to german auto-makers: 36,500 working at auto-maker plants and 80,000 as suppliers.

What would the impacts be for the US if the US president were to impose such tariffs? The Peterson Institute recently released a report on the potential impacts of a 25% proposed tariffs in auto imports. The report argues that the production in the industry could drop by 1.5% and that it could cause 195,000 US workers to lose their jobs over a 1-to-3 year period. In case of retaliation in-kind with tariffs by foreign countries on the same products, production would fall 4%, 624,000 US jobs would be lost, and 5% of the workforce in the auto and parts industries would be displaced. The ripple effects of such tariffs could have disastrous consequences for states hosting assembly plants in the long-term. The latest risk assessment by Airbus addressed to the UK government regarding the uncertain future around Brexit should be carefully read by US lawmakers and Trump associates when deciding on imposing tariffs or not. Multinational corporations hold quite a strong leverage in the decision-making process of trade policies.

Rocky transatlantic relations

Again, as argued in previous analyses, the future of transatlantic relations appears unstable and rocky. Several points shall be addressed reflecting on US treatment of historical allies and the future of the liberal order. First, The Trump administration has demonstrated over and over its decision to split with and humiliate America’s traditional allies. The message addressed by the American president and members of his cabinet, in particular Peter Navarro, towards the Canadian prime minister post-G7 meeting as well as the continuous undermining of the German chancellor illustrate Trump’s modus operandi. Per Wess Mitchell, US Assistant Secretary of State for European and Eurasian affairs, the Trump administration is implementing a “strategic renovation” with traditional allies. President Trump has made a point to undermine his German counterpart, Angela Merkel. She was one of the closest partners of President Obama, is leading the most stable and largest European economy, and has not shied away to defend the liberal order. The appointment of Mr. Grenell as US Ambassador to Germany, who has broken protocol on two occasions, confirms it. Mr. Grenell in an interview with Breitbart said “I absolutely want to empower other conservatives throughout Europe, other leaders. I think there is a groundswell of conservative policies that are taking hold because of the failed policies of the left.” The Trump administration is seeking to undermine and destabilize the German chancellor.

http_com.ft.imagepublish.upp-prod-us.s3.amazonawsBy looking at the trends and rhetorics (which can shift very quickly as demonstrated by the change of position by Trump towards the North Korean dictator), a trade war is quite an eventuality. For the EU, trade has been the core dimension of its external policy and international presence. The EU sees multilateralism and free trade as one of its most successful policies. Furthermore, the EU is at a crossroad with the continuous rise of populist forces gaining traction in core EU countries, such as recently Italy. The EU ought to defend its interests and cannot cave in to foreign pressures, otherwise it would play in the hands of the Orban, Salvini and Le Pen of Europe. And last, the European market is one of the richest, largest, developed and influential in the world. By the weight of its market, the EU shall not shy away from direct confrontation with the US. As per Charlemagne of The Economist, the EU has three strategies in hand to chose from: capitulation, resilience, and containment. Resilience is the most likely strategy at this period of time.

Lastly, the main issue with regards to trade is China, and it has remains unaddressed. Both the US and the EU agree with the fact that China, since joining the WTO in 2002, has not played by the rules. The US could have worked with the EU and utilized the common procedures and processes, the international trading system. However, Trump said it on the campaign trail, and is now doing it while in office, the rules-based global trading system is being portrayed as the cause of American demise. Trump wants a trade approach based on bilateral deal-making, transactional relations and only fair for the US. Donald Tusk, the president of the European Council said in Canada, “the rules-based international order is being challenged, quite surprisingly… by its main architect and guarantor, the US.” For instance, Trump refused to sign the G-7 communiqué. For the EU, the liberal order and rules-based trading system are critical for its functioning. Cecilia Malmstrom said this clearly, “The E.U. has a responsibility to stand up for open global trade.”

The American president seems more at ease surrounded by dictators and authoritarian leaders than with traditional American allies. The affronts to the liberal order and America’s allies are beginning to add up considering his policy choice to leave the TPP, Paris deal, the Iran deal, relocate the US embassy in Jerusalem, and unilateral imposition of tariffs. Europe knows that Trump is temporary, but his continuous attacks on the liberal order will not only undermine the US position in the world but lead to a highly unstable multipolar order. “Trump’s preference for a divide-and-rule strategy produces a game” writes Javier Solana “that will create only losers.” Europe knows it, the US may have a serious headache post-Trump.

(COPYRIGHT 2018 BY POLITIPOND. ALL RIGHTS RESERVED. THIS MATERIAL MAY NOT BE PUBLISHED, BROADCAST, REWRITTEN OR REDISTRIBUTED WITHOUT PERMISSION).

 

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The stamp of America First on US foreign policy

Donald Trump
Credit: AP

What if the implementation of the tenets of America First onto US foreign policy was for real? What if Donald Trump had been consistent on telling Americans and the world, that he was serious on taking the US out of the liberal order? and, ultimately on bringing the US status down from being the centerpiece of the liberal order to a simple superpower?

Since 2017, it seems that Trump and his advisors/implementers have been working on cutting all the strings attached around the US in terms of commitments, engagements, responsibilities and duties to transform the US from the ‘indispensable’ power into a simple sovereign power. After years of trying to grasp the logic of Trump’s foreign policy, it appears to be the most likely hypothesis at this point of time.

For two years, foreign policy experts and American allies have been trying to understand the logic of Trump’s approach to foreign policy. And based on the structures, heritage, norms and values of the post-World War two order, Trump’s decisions are incomprehensible. For instance, the departure of the US from the Paris climate deal, the different rounds of tariffs and quotas (washing machines, solar panels, aluminum and steel, and potentially car tariffs), the withdrawal from the Iran deal, the visceral despite for the European Union and deep support for Brexit, the departure from the Trans-Pacific Partnership negotiations, the lingering NAFTA talks, and lately the relocation of the US embassy to Jerusalem are all a direct affront to the trust of allies. These radical shifts are not increasing American security, not advancing American interests and undermining global security.

What does that tell us? Donald Trump wants nothing to do with the liberal order and believes that the US can be better off alone dealing on bilateral basis and imposing its weight and will onto others. Trump and his administration may appear to see a success in this approach considering the limited response by the Europeans (still at awe by the permanent affront of the liberal order), and a mild reaction by China (so far).

Donald Trump believes, as a large segment of the American electorate, that the US has no business in playing the role of the world policeman. The international institutions, designed post-1945s, making the liberal order are in fact limiting the American sovereignty and national interests. The multilateral system orchestrated via the United Nations system, the World Trade Organization, and the multitude of regimes undermines the way the US can act. In December, Susan Rice, Obama’s national security advisor, wrote “these omissions [of the liberal elements in Trump’s NSS] undercut global perceptions of American leadership; worse, they hinder our ability to rally the world to our cause when blithely dismiss the aspirations of others.” Barry Posen summarizes it into the argument that Trump’s grand strategy is “primacy without a purpose.”

This approach and shaping of American foreign policy are extremely dangerous for the US and the world at large. Donald Trump inherited a strong economy and a relatively stable global order. The US is not involved in any major crises, at the exception of Iraq, Syria and Afghanistan. Donald Trump did not have to save the American and world economy the way his predecessor needed to respond. These domestic and geopolitical realities have in fact created an illusion for this administration that has not proven itself in addressing any critical crises. The Trump administration feels almighty when it has in simple terms only been in cruise-control mode. Most of the crises faced by the Trump administration are in fact self-inflicted, as proven by the sudden cancellation by Donald Trump of the upcoming Singapore summit between the US and North Korea.

If Donald Trump continues on this trend and truly takes the US out of the order designed by the Americans and Europeans post-1945, he will not only launch the US into a motion of de-credibility of the US, weaken the liberal order, and simply downgrade the US into a regular superpower. Here are the dangers of such trend: first, history has taught us that multipolarity is greatly instable. The probability of war at a regional and global scale would increase. Second, the challenges ahead are becoming more global and complex to solve than ever before. The case of climate change, nuclear and chemical proliferation, free-trade, pandemics, mass migration, and stability of the financial system all require a imagesnetwork of institutions and regimes as a platform of discussion and interaction among states. These multilateral platforms permit to align interests, deepen cooperation and coordination and design mechanisms to implement and enforce agreements and policies. One country, as economically and militarily powerful as the US today, cannot solve any of these issues alone. Third, in his quest to greatness (almost like Don Quixote) Donald Trump will simply undermine the status, influence and power of the US and downgrade it to a superpower. Ironically, a long-term decline in influence and power will require the US to increase its alliances to balance its progressive global decline. That is the story of past hegemons. Fourth, this abrasive style may alienate once and for all American allies. The comments by President Donald Tusk at the recent EU summit in Bulgaria speak volume about the state of transatlantic relations. He said “We are witnessing today a new phenomenon: the capricious assertiveness of the American administration. Looking at the latest decisions of President Trump, some could even think, ‘With friends like that, who needs enemies?’”

The US foreign policy under this Trumpian paradigm is due to a lack of understanding of the past 70 years and world history, the arrogance of inheritance of such power, and ideology. Furthermore, the Republican establishment in power and control of the Congress (House and Senate) seems to agree with the current direction of US foreign policy considering the lack of opposition (at the exception of Senator McCain). The decline of the US has been projected for quite sometime and it certainly won’t occur overnight. However, the trends these last years of this administration confirm to American allies and the world that analyzing Trump’s foreign policy decisions based on past paradigms will lead to more confusion than understanding. Trump’s America first is for real and could have lasting negative impacts on the US, world affairs and global security.

(COPYRIGHT 2018 BY POLITIPOND. ALL RIGHTS RESERVED. THIS MATERIAL MAY NOT BE PUBLISHED, BROADCAST, REWRITTEN OR REDISTRIBUTED WITHOUT PERMISSION).

It is Politics, Stupid!

CREDIT: ANADOLU AGENCY
CREDIT: ANADOLU AGENCY

“I really cannot remember, in all my time in European politics, whether I have come across a situation like this. This is really all about the European Union. If the EU is going to have any credible force, it is going to have to demonstrate it is capable of solving its own problems.” – President Martin Schulz on July 12th, 2015 during the Euro Summit Meeting

Forget about economics, finance, banking regulations, social welfare policies, debt forgiveness; the future of Greece solely depends on politics. “The answer [of endless negotiations on solving the Greek crisis these last five years] cannot be found in economics,” writes Yanis Varoufakis, the former Greek finance minister, “because it resides deep in Europe’s labyrinthine politics.” Greece’s destiny is a simple political question based on several concept: trust and confidence.

The Deal

After a week long of back and forth between Greece and the European capitals, Brussels is once again the siege of a Greek marathon. A meeting of the Eurogroup finance ministers started on Saturday, July 11th and ended the next day around 3pm. Ensuing it a general EU summit, with the 28 leaders, was supposed to take place, but was instead cancelled and transformed into a crisis summit of the 19 EU leaders of the Eurozone. The future of Greece as a member of the Eurozone was clearly on the line with a very reticent German team (Chancellor Merkel and her Finance Minister Wolfgang Schäuble proposing an eventual ‘temporary Grexit’).

As reported by the Financial Times, the finance minister negotiations, which were fruitless and tense, let the way to the EU leaders, whom could not do better considering Germany’s position. Until François Hollande, President of France, whom had been extremely active in advising, helping and defending Greece in the last mile, called for a meeting in Tusk’s office. Preisdent Tusk was reported saying “Sorry, but there is no way you are leaving this room” until a deal is reached.

Credit: Aris Messinis/Agence France-Presse — Getty Images
Credit: Aris Messinis/Agence France-Presse — Getty Images

Interestingly enough, Tsipras’ proposal prior the July 11th meeting included: raising the age for retirement; a VAT hike at 23% across sectors; privatization of key sectors of Greek economy; and removal of tax breaks for some Greek islands. These reforms would permit to unlock a third loan package of $59.6bn until 2018. Tsipras’ proposal was highly similar to the one offered by the international creditors. Even Jean-Claude Juncker during the meeting recognized the proposal brought by Tsipras as almost identical to the one put on the table by the creditors weeks earlier. And the President of European Parliament, Martin Schulz, called for avoiding a Grexit and find a solution.

Based on the deal reached on July 13th, the Greek Parliament voted and agreed on July 15th, on the bailout deal, which was approved with a 229-64 majority. However, Tsipras’ party, Syriza, seems to have lost some unity with 32 Syriza MPs defying their leader’s pleas and rejected the deal. Clearly the terms of the bailout are in direct contradiction with Syriza’s policies, beliefs, and promises, as well as sidelining the results of the referendum. These contradictions could push even further the political crisis in Greece and lead to yet another election during the summer.

Chancellor Merkel, the Finish government and others are not convinced about the proposal and especially Greece’s commitment. The Greek drama is taking more than a simple economic/financial turn, it is purely political. It appears that some EU Member States, like Germany, Finland, Slovakia and others, are more inclined to go after Greece and its leftwing government led by Alexis Tsipras, than finding a real deal that would help in the long term the country.

One core reason is trust, or at least ‘lack of trust.’ Some experts have argued that Tsipras was now on Merkel’s black list after his political coup, the referendum. Merkel and others EU leaders do not trust any longer Tsipras and his government. Or even has argued by Yanis Varoufakis, “based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.”

Death of the European Project?

The Greek file should be considered as an overall failure for the European ethos. Many economists, like Joseph Stiglitz, have been very critical of the negotiation process and the agreed deal. One of the most virulent denunciation of the deal was Paul Krugman, writing that “it’s [the deal] a grotesque betrayal of everything the European project was supposed to stand for.” Even the International Monetary Fund, a global advocate for austerity measures and straightjacket policies, has been critical of the dealbroken_euro_fit calling instead for a huge debt relief for Greece.

Last but not least, Nicolas Gros-Verheyde of Bruxelles2 wonders about a core question: “Is Europe becoming the sum of its egos?” The Greek file embodies more than solving an economic problem, it has become a vicious fight between powerful EU Member States. These egos are affecting their global visions and understandings of the core principles and values of the European endeavor. But right now, the EU is failing at this important crossroad. The EU cannot find a real solution on any major crisis from counterterrorism in Mali, to migration crisis in the Mediterranean, to Ukraine/Crimea, to the domestic rise of nationalism, and naturally Greece. Are politics killing the EU? It certainly looks like it.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Greece votes Oxi, Europe says Grexit

ATHENS, GREECE - 2015/06/29: The word 'OXI' (NO) written on a banner in front of the Greek parliament.  Greeks demonstrate in Syntagma square in support to a 'NO' vote in the referendum that will take place on the 5th of July, whether to accept the  new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
ATHENS, GREECE – 2015/06/29: The word ‘OXI’ (NO) written on a banner in front of the Greek parliament. Greeks demonstrate in Syntagma square in support to a ‘NO’ vote in the referendum that will take place on the 5th of July, whether to accept the new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)

“All of us are responsible for the crisis and all of us have a responsibility to resolve it.” – President Donald Tusk, July 7th, 2015

Greek citizens voted in majority Oxi to the July 5th referendum. The question asked by the Tsipras government, which was campaigning for a ‘no’ vote, was yes or no to accepting a continuation of the bailout program with all the austerity measures coming with it (read here a previous analysis). The results were very clear throughout the country with 61.31% for the no vote and 38.69% for the yes vote (see here the map produced by the Gr20150711_woc001_0eek Ministry of Interior showing that the no vote won in each Greek region). Greek citizens felt that the best option – out of two bad – was to reject the terms of the bailout on the table. If for a day the discussion was about the meaning of the ‘no’ vote (is it against the EU, the Euro, or simply a desire to remain a member of the Eurozone), today’s reality is about the future of Greece as a member of the Eurozone. So where do Greece and the EU go from now on?

Negotiations and Survival

In less than two days, a succession of events has taken place. For over five years, it seems that the Greek file was dragging, it has certainly taken an all new meaning and urgency. Prior to the results, Chancellor Merkel of Germany was meeting her counterpart, President Hollande, in Paris in order to find a common ground. The day ensuing the political victory of the Tsipras government, the infamous Greek finance minister, Yanis Varoufakis, announced his resignation. Many advanced that Tsipras had to go in order to demonstrate to his European counterparts that Greece was serious in seeking for a viable option. Varoufakis had gone too far and had lost some of his support within the Eurogroup of finance ministers.

Then on Tuesday, an emergency summit meeting took place with no substantial results.

Credit: Yves Herman/Reuters
Credit: Yves Herman/Reuters

Tsipras was supposed to bring, as highly recommended by the French government, a new proposal. But the summit meeting failed as Athens did not provide an acceptable option. Tsipras has now until Thursday (as requested by Merkel) in order to present a new proposal to his creditors. A failure in finding an agreement could lead to “the bankruptcy of Greece” warned Donald Tusk, the president of the European Council, “and the insolvency of its banking system.” Tusk added that “tonight I [Donald Tusk] have to say it loud and clear — the final deadline ends this week.” On Sunday, as announced by the 19 eurozone countries on tuesday, the 28 EU leaders will be deciding on the future of Greece.

In addition, the New York Times reported that for the first time – at least publicly – the President of the Commission, Jean-Claude Juncker, has announced that he has “a Grexit scenario prepared in detail.” If a Grexit scenario is now on the table, Tsipras will be defending his case before the European Parliament on Wednesday morning.

Consequences of Staying in the Eurozone, or Leaving It?

In the middle of the negotiations and in finding a solution, a key player is the European Central Bank (ECB). Currently the ECB is the institution that is keeping the Greek banks alive by providing liquidity. Because today Greece is unable to borrow money on the international market and the Europeans are the one providing money to Greece in order to have its economy and banking systems going. The ECB will continue to do so if a deal is agreed. However, in the case of a break-up, the ECB will remain a central player as it will stop providing liquidity to Greece. In addition, even if Greece missed its first payment of July 1st to the International Monetary Fund of $1.8bn, the second deadline of July 20th to the ECB of $3.8bn will be key for Greece and the EU.

If Greece wants to stay in the Eurozone, they will have to implement a set of policy measures that will require: tax reforms; fixing the pension program, which will affect early retirement program; labor market practices. Once these are ongoing the international and european creditors will have to give meaningful debt relief.

In the case Greece decides to leave, or is expelled from the Eurozone, then it will have to introduce a new currency. The country will ultimately default on their debts, and will have to create its own economic agenda in order to lay down the foundation for future economic growth. This scenario will naturally require serious structural reforms.

If Size does not matter, Precedent does

The Greek case is not about the size of the Greek economy. In fact the Greek economy only represents 2% of the Eurozone GDP. So far it does not appear that a Greek default could take with it the whole Eurozone and send a massive shockwave throughout the global markets. No, the case of Greece is a matter, for the EU and its Member States, of establishing a precedent. Germany and other wealthy Eurozone members want to avoid such precedent, where a member state refuses to pay its debts and call for a national referendum in order to provide such country leverage at the European level. Chancellor Merkel was correct in claiming that Greece is a sovereign state and has the right to organize such a referendum, however what type of legitimacy does that provide the Tsipras government in coming back at the bargaining table?

The Greek referendum is national decision on a complex financial question. But the Greek referendum does not affect the decision of Greece’s creditors. If the vote empowers Tsipras domestically, it does not at the European level. Now, Tsipras has to navigate in these tumultuous waters of a domestic electorate, opposed to additional austerity, while providing a proposal acceptable to his creditors, most of them highly in favor of additional austerity measures. Tsipras seems to be facing a conundrum, either remaining in the Eurozone and what it entails, or leaving the Eurozone, and dealing with the consequences of a default.

In the mid-term, there are many technicalities that need to be figured out if Greece decided to leave the common currency. The legal baseline is the 1992 Maastricht Treaty,

Photograph by Federico Gambarini — picture-alliance/dpa/AP
Photograph by Federico Gambarini — picture-alliance/dpa/AP

which does not provide any information in order to leave the common currency. In the contemporary European history (aside from the collapse of Habsburg empire), there are no precedents, no rules and no plans in order to leave a common currency. But with a return of the Drachma, the real question for the Greek government will be about the exchange rate between the Drachma and the Euro as all Greek accounts are in Euros. At the end of the day, the Greek savings will be severely devaluated causing massive financial losses.

The Greek drama illustrates the complexity of the unfinished European construction. Since the Treaty of Maastricht of 1992 laying out the current foundations of the European Union, the Member States have avoided any decisions for furthering/deepening the integration process or completely loosening it. Today, if Greece is in such trouble, is certainly because of its domestic problems (high level of corruption and lack of structural reforms), but as well because of an integration à la carte of the Eurozone. At the end of the day, a Grexit or not is only a technicality. The real question is: will the Eurozone members be working once and for all on finalizing a fully integrated and functional Eurozone?

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Mr. Tusk Goes to Washington

(AP Photo/Susan Walsh)
(AP Photo/Susan Walsh)

In his first visit to Washington in his capacity as President of the European Council, Donald Tusk met with President Obama and Vice-President Biden today, March 9th, 2015. Over his two-day visit to the American capital, Donald Tusk seeks to solidify the EU’s relationship with the US. In addition, President Tusk will visit the Holocaust museum tomorrow, March 10th, in order to send a message of reconciliation to Europe’s Jewish community after the recent rise of anti-Jewish sentiments.

The agenda discussed between the two transatlantic leaders covered the following issues: Russia and the crisis in Ukraine; the situation around the Mediterranean with Syria, Libya and the consolidation of the Islamic State (IS); and naturally the negotiations over the Transatlantic Trade and Investment Partnership (TTIP). This comprehensive agenda underscores an interesting paradigm: each crisis is regional for the EU with serious international repercussions.

On the case of Ukraine and the role of Russia, the Europeans and Americans share the visions of the problem as it is a direct threat to the old concept of national sovereignty and territorial integrity. However, the Europeans, as expressed by President Tusk prior meeting with President Obama, are not willing to deepen the sanctions against Russia. There is a lack of unity among the EU-28 for domestic political reasons – like in Italy and Greece – and strong lobby groups in France, Britain and Germany – weapons, energy and finance – fearing a deepening in the tensions between the EU and Russia. From a personal standpoint, President Tusk, a former Prime Minister of Poland, has much more hawkish view of the problem and tends to emphasize the role of NATO.

The Mediterranean region is becoming one of the hottest part of the world. Geopolitics are moving fast and looking dire from Europe. The war in Syria seems unattainable, and the consolidation of IS in Syria, Iraq and now Libya is of great concerns for the EU. With a number of failed-states causing a regional vacuum, IS has found its territory to implement its strategy and vision. IS is attracting young Europeans, leading Europeans to conduct terrorist attacks against other Europeans, as well as widening its territorial control in the Middle East. President Tusk told reporters on March 9th, that “We [Europeans] must help because we cannot have a failed state run by warlords and anarchy — sitting in anarchy just 100 miles off the southern coast of Europe.” The power vacuum left after the fall of Gaddafi in 2011 had not been filled until the arrival of IS. Now IS is at the doorstep of Europe.

In the case of the TTIP, the negotiations initiated in 2013, are moving into their their year. It was supposed to be a mega-free trade deal, quickly signed, allowing further harmonization and lowering tariffs, allowing to bail-out the European economies, and ultimately boosting up the transatlantic economy. The TTIP is a way for the US and the EU to compete with the rise of new powers like China, India and Brazil. But instead a quick agreement, the negotiations have become more complex and Europeans have increased a certain numbers of concerns about the consequences of such FTA on their lives. Several issues are of concerns for Europeans: first, the lack of transparency in the negotiation process; second, lowering standards on health and food regulations (on Genetically Modified Food or even chlorine washed chicken); third, investor-state dispute settlement mechanisms (ISDS); and last, a certain opposition to globalization and American capitalism. If Americans and Europeans want to have the TTIP agreed, it will need to take place in 2015 otherwise it could look like the endless WTO’s Doha Round.

The transatlantic relationship is one of the world’ strongest and this high-level visit by President Tusk demonstrates that the EU and the US see eye-to-eye on foreign and economic policies. The degree of interdependence and interconnection between the two sides of the pond is such that the US cannot ignore what is happening at the doorsteps of Europe, and the Europeans have to realize the importance of the alliance with the US in order to assure its security.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

 

 

A Book Presentation – Debating the CSDP

Tobias Schwarz/Reuters
Tobias Schwarz/Reuters

A paradox is taking place in Europe. On the one hand, armed conflicts, traditional state invasions, revolutions, terrorist activities among others are taking place at the European Union’s doorstep. On the other hand, the EU is going through a process of risk-aversion and lack of strategic vision combined with progressive demilitarization as most EU Member States are barely investing in their national armies, in R&D, and even in their commitments to the Common Security and Defense Policy (CSDP) and North Atlantic Treaty Organization (NATO). With the current types of threats and the global shift of power, one would expect the EU and its 28 Member States to maintain and/or at least increase their spending and investments in defense and security policies. The book, Debating European Security and Defense Policy. Understanding the Complexity, asks a simple question: “Why has the integration process of the EU security and defense policies been so unpredictable?” (p.4)

9781472409959.PPC_PPC Template

This overarching research question has allowed the author to demonstrate throughout 12 chapters the multitude of dimensions and variables affecting the integration and/or demise of the CSDP from the 1950s to today. Debating European Security and Defense Policy is a journey into the European construction and broader narratives of a commitment among the initial six Member States to the current EU-28 to develop a common approach, policy and thinking to security and defense. Such project is directly intertwined to the story of European integration as the first attempt goes back to 1954 with the European Defense Cooperation (EDC) promoted and killed by the French, and supported by the US under President

Credit: Chancel ‘Get this idea well and truly into your head!’ This cartoon depicts the threat that would hang over France if it were to ratify the Treaty establishing the European Defence Community (EDC).
Credit: Chancel
‘Get this idea well and truly into your head!’ This cartoon depicts the threat that would hang over France if it were to ratify the Treaty establishing the European Defence Community (EDC).

Eisenhower. The evolution of European defense is closely linked to the integration process of the Union and saw several phases of integration. The problem of harmonization and integration in defense is similar to the one on fiscal policy. Both policies are causing headaches for Member States as they are at the crossroad between traditional state sovereignty and EU integration. Defense and fiscal policies are some of the most controversial to harmonized as they are forcing Member States to identify up to what point integration is necessary without affecting too much the sanctity of national sovereignty.

Purpose, Debate and Skepticism about the CSDP

The idea of this book fermented throughout my research for my Ph.D. dissertation seeking to look at the different degree of integration in EU defense and security. During a very insightful interview with a top expert in a highly renowned and respected Washington think tank, the interviewee told me: “your dissertation ought to start with the ESDP [this was before the 2009 Lisbon Treaty] and terminate with the ESDP.” For some reason, such comment/advise has stayed with me all these years and could be the words than fostered my desire to dig deeper into the topic of the CSDP.

The goal of this book was to decorticate the CSDP into manageable pieces centered on relevant debates. This work shall be seen and understood more as a reflection with diverging narratives and be read as such rather than a linear storyline. The manuscript is organized around three main parts: part one, the theoretical debates (positivist approaches) around the CSDP; part two, the historical and strategic evolutions of European Security and Defense Policy; and, part three, the Actors of the CSDP such as the Member States, the different institutions (Parliament, Commission, Council, EEAS) and agencies (European Defense Agency), the High Representative, and the CSDP (read here the table of contents).

This work distinguishes itself from the existing body of literature by the structure of the argument and chapters (access here to the introduction). Each chapter, answering an overarching research question, is divided into two sub-level research questions underscoring two-sides for each theme. Instead of evolving in the gray area as the entire literature on the topic, the book purposely answers each question through a yes and no answer. The reason behind such model is to demonstrate to the reader how successful or not the EU and the Member States have been in promoting and developing the CSDP. Such approach has demonstrated to be very effective in order to foster discussion and a debate.

Additionally, the book features a foreword written by Dr. Jolyon Howorth, undeniably one of the most accomplished researchers on the topic (read here his latest analysis on the 2011 Libyan military operation). His argument fits perfectly with the purpose of this book to underscore the existing debate on the CSDP. As he writes “Prior to 2009, the overall mood was upbeat, optimistic and constructive. Most scholars writing in the late 1990s and early 2000s were confident that the creation of a European defense capacity was an important new development, both for European integration and for European security. […] All this began to change around the time of the ratification of the Lisbon Treat. The mood among scholars switched to one of uncertainty, pessimism, skepticism” (p. xi).

One of the most interesting chapters to write and research on was about the impacts of the 2008 financial crisis on the CSDP (Chapter 7). Theoretically (as informed by neoliberalism), the financial crisis should have been a vector contributing to the fostering of integration in security and defense policies; but the EU has seen another evolving trend: mini-clusters or sub-EU defense integration. Member States have instead increased spending on sub-regional defense cooperation initiatives with their closest neighboring states sharing similar national security problems like the Visegrad Group (as well known as the V4 composed of Czech Republic, Hungary, Poland and Slovakia), Weimar Triangle (Poland, Germany and France), Nordic Defence Cooperation (NORDEFCO composed of Denmark, Finland, Iceland, Norway and Sweden) among others. A debate among EU experts exist as some claim that these sub-regional initiatives will ultimately spill-over at the regional level – meaning the CSDP –, while others (myself included) see a trend lowering the deepening process of defense and security integration at the EU. This could lead to a multi-speed Europe in the realm of defense and security.

The CSDP, A Priority in the Future of the EU?

Once again, the CSDP does not appear to be on the list of priorities of the EU-28 for the coming year or even decade. Almost a year ago, the 27 heads of states and governments (Croatia was not part of the EU yet) met at the December defense summit (read analyses on the summit here, here and there), wherein they all committed to deepening European defense, and famously agreed that “defense matters.” One major way to empower the CSDP since the 2008 financial crisis has been through an increase in the pooling and sharing (P&S) of military capabilities among the Member States in order to decrease the levels of duplication at national levels.

From “defense matters” to “what defense?” the EU-28 has not expressed a great interest in empowering the CSDP. The usual argument of Pooling & Sharing (P&S) has been a way for Member States to avoid to develop and commit behind a clear strategic vision requiring credible European forces and strategic thinking. Additionally, the pillars of the CSDP, the Big 3, have been shifting away their interests from the CSDP to more national policies. Historically, European defense has evolved thanks to Franco-British initiatives. With the current distance between Paris and London for political and ideological divergences, the CSDP is slowing declining. Additionally, France has increasingly gone alone since the Libya mission in order to advance its interests and influence in Africa; Britain is fighting against the EU and trying to identify its future outside of the Union; and Germany is struggling in maintaining a standing national army and values its influence over other EU

Source: Getty
Source: Getty

policies (nevertheless, Falk Tettweiler argues that the CSDP fits in German mindset for its contribution to crisis management and prevention, civilian missions, and its multilateral nature).

Debating European Security and Defense Policy comes at the time where the CSDP is not a priority for European capitals and remains a mystery to most European citizens. This manuscript seeks to identify the important problems facing the EU and many themes of debate challenging European experts. The new EU leadership, President Tusk, President Juncker and HR Mogherini, seems to have brought a new wind into their respective positions (even though President Van Rompuy has done an excellent job). It may be that this new group of EU leaders could reinvigorate the CSDP and EU foreign policy, at least at the European level.

The book is available for purchase here on Ashgate’s website and here on Amazon.

(Copyright 2014 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Four Questions for the New Commission

Juncker-Commission-600x427

The European Parliament (EP) has finally approved the new Commission, known as the Juncker Commission. After his election with a large majority by the European Parliament on July 15th, 2014, Jean-Claude Juncker, former Prime Minister of Luxembourg and long-time European advocate, has been working on shaping its tenure and designing his Commission for the 2015-2019 period. On October 29th, Jose-Manuel Barroso, the current President of the Commission, will participate at his last meeting at the helm of the Commission. On Thursday, Barroso will be meeting with Juncker and the newly appointed President of the European Council, Donald Tusk – whom would take his functions on December 1st -, for a last transition meeting before the beginning of the Juncker era.

On September 10th, 2014, President-elect Juncker presented his team and the distribution of the portfolios accordingly. Ensuing his presentation, each Commissioner-to-be was facing individual hearing before the relevant European Parliament committees. From September 29th to October 20th, the EP was interviewing each candidate. Out of the 27 designated, only one was rejected, Alenka Bratušek, the Slovenian candidate responsible for the Energy Union. Other candidates like France’s Moscovici, UK’s Hill, faced tough confirmation hearings. Jonathan Hill, candidate for the financial DG, was even called back for a second hearing. It is Frans Timmermans, a former foreign minister of the Netherlands, whom becomes the first vice president and will serve as Mr. Juncker’s deputy.

Source: European Commission. 2014.
Source: European Commission. 2014

Four Questions for the Juncker Commission

Even though Barroso is still at the helm of the Commission (read here his defense of his tenure), one should take the time to raise a series of questions prior the shift of power at the Berlaymont.

1. Will the Juncker Commission be the political, social and human commission promoted at the time of the appointment of Juncker?

2. Making Europe closer to Europeans – reconciling Europe with the Europeans. How successful will Juncker and its apostles be at it? This issue is more than simply explaining to Europeans citizens what the EU does and doesn’t. It is in fact an important dimension considering the rise of the extremes – right and left combined – in most EU Member States. Juncker needs to create a new narrative explaining the importance of the EU – without sounding like a history professor – and demonstrating its relevance in order to assure the survival of European uniquenesses under the forces of globalization. The recent outcomes of the European Parliaments’ elections in May 2014 clearly demonstrated the gap between Brussels and Europeans. The blame ought to be distributed across the board: Member States have played the Brussels’ bashing game in order to cover up their incompetencies for too long; Brussels has sounded to distant and cold by adopting the approach of one policy fits all; European citizens have not done their jobs of citizens for too long – and even enjoyed the ride when the economic situation was stable and rosy – and have blamed the Euro and Europe for all their traumas – including high level of unemployment, which the Commission has no power over it -.

3. Member States – their support to the Juncker Commission will be crucial for a new energy in European politics. Under Barroso, the Commission has lost some of its relevance and power at the benefit of the Council and European Council. Juncker ought to make the Commission once again relevant and guardian of the Treaties. According to the Treaties, “the Commission has the sole right to initiate European legislation and the power to enforce treaties by suing member governments at the Court of Justice of the European Union.” But Juncker cannot do miracles with the current governments like the ones in the UK and France blaming all their turmoils on Europe. The most recent outcry by David Cameron about the extra €2.1 billion bill is a ‘joke.’ According to the EU budget commissioner, Jacek Dominik, British officials knew for 10 days the adjustment of their share to the EU budget based on changes in their gross national income (watch the video here). Cameron’s anger is simply political to attract his electoral base and the more extremes branch of the UKIP. In France, the recent submission of the new French budget falls under the same category, minus the anger. Core EU Member States are playing the card of domestic political appeal at the cost of European soundness. France cannot be upset at the rules that it had previously agreed on and voted in favor. Barroso undermined to some extent the power of the Commission, will Juncker bring it back?

4. How does Juncker get the EU become more integrated on important policies like foreign affairs, energy/environmental policies and fiscal policies among others. On foreign affairs, that would be in the hands of the HR/VP Mogherini. But on energy and environmental policies, the Juncker Commission could once and for all initiate a clear agenda for a shift towards greener energies, while contributing to economic growth – which has been addressed during the recent European Council meeting in late October -. In any case, “there is a sense that Juncker will try to solve Europe’s ongoing problems pragmatically,” writes Alice Pulh, “instead of launching brand new polices with innovative ideas.”

Food for Thoughts

Yes this section may be too far fetched, but it is actually an important point of discussion. A Commission with the representation of the 28 Member States (MS) is not only too large, but also anti-supranational by nature. The fact that MS are still the ones selecting their candidates and bargaining for the DG of their choosing is contrary to what the Commission should be all about. The President ofjean-claude-juncker-1-Copy Commission should be the one selecting the candidates of his choice in order to compose its own Commission. Additionally, having the MS promoting a candidate to represent themselves at the Berlaymont goes against the idea of the Commission being ‘above’ the Member States in terms of influence and power, and truly European -for whatever it means-. The Commission is not about defending national interests, but European interests. This new commission has highlighted a series of problems in balancing national and european interests, as illustrated by the difficult hearings and negotiations over three nominated commissioners, France’s Pierre Moscovici (economic affairs), the UK’s Jonathan Hill (financial services) and Spain’s Miguel Arias Canete (climate and environment).

Then, the Juncker Commission is facing a serious challenge, relaunching the economic engine of the EU. Following the EP vote approving the Juncker Commission, Jean-Claude Juncker said that

[it was] “time to roll up our sleeves and get down to work: to kick-start economic recovery, create more and better jobs, address the plight of Europe’s youth for a better future, protect the most vulnerable in our society and cope with the rapidly deteriorating geopolitical situation.”

In order to re-launch the economic engine of the Union, two options are on the table. Juncker has inherited one option, the Transatlantic Trade & Investment Partnership (TTIP), and he has been advocating, option 2, for an EU-wide economic boost through investments. So one approach is from within, the other from outside. The TTIP was initiated under Barroso and has turned into difficult negotiations between the EU and the US and among the EU-28. The TTIP is supposed to create the largest economic bloc in the world in order to balance the rise of new powers like China, India and Brazil. The second option is the €300 billion investment package introduced back in July by Juncker. The package has been contentious as nobody knows where the money would come from and it seems very unlikely that the EU-28 would anytime soon pool the money into a common fund supervised and utilized by the Commission. Both aspects, the TTIP and the €300 billion investment package, shall be understood as ‘new deals’ in order to relaunch European economic engine. Juncker understands very well that a long-term sluggish economic environment could affect the survival of the European welfare states and ultimately the EU as whole.

(Copyright 2014 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).