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.

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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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Two days in Paris between friends?

FRANCE-US-POLITICS-DIPLOMACY

Donald Trump, President of the US, responded positively weeks ago to the invitation of the newly elected French president, Emmanuel Macron, to assist at the military parade of the 14 of July. French public opinion, as well as experts, were certainly divided concerning such invitation and the presence of the American president at this national celebration. Politipond argues that such invitation was aligned with France-US interests and US-Europe interests regardless of the domestic turmoils of Donald Trump and his cabinet. Furthermore, this official visit highlighted a complex divide between the perceptions of the US, as an ally, and the perceptions of the US through the representation of his president. This subtlety was lost in translation.

Logics and reasons

Macron’s invitation has divided experts, public opinion and the media. Politico Europe probably published the article with the most telling title, Trump and Macron go from mano a mano to tête-à-tête  referencing the evolving tone of the relationship between the two men. If Macron demonstrated toughness during their first meetings at the NATO and G-7 summits in May, their third meeting on July 13-14 seemed much warmer. The claim is that Macron strategized his interaction with his American homologue in order to foster respect. Candidate and then President Trump have been consistent, as he has continuously demonstrated considerable respect to strongmen such as Russian president, Vladimir Putin, Philippines president Rodrigo Duterte, and apparently Emmanuel Macron.

Some have compared Macron and Trump as they share some similitudes. Both won outside the party system; Macron created a movement Onward! a year prior the election and managed to undermine the historical supremacy of the right and left by winning the presidential and legislative elections, while Trump running as a republican candidate certainly does not fit within the conventional ideological lines of the party. Both are framed as non-politicians, as having never ran for office. If it is true for Trump, it is not the fully the case for Macron having evolved in the highest political spheres during the Hollande presidency. But the comparison cannot go furthermore. Macron has a certain understanding of politics and the history of the French Fifth Republic as designed and envisioned by Charles de Gaulle in 1958. Macron is carefully crafting a presidential image, under the Jupiterian president aura, through a demonstration of strengthen as he is oftentimes represented surrounded by French military might. If President Sarkozy was seen as the hyperactive president, François Hollande, the ‘normal’ president, Macron is concerned about displaying and embodying French grandeur.

From Paris, especially the Elysée, the message behind this invitation was to commemorate the entry of the US in 1917 in World War one, which plays against the isolationist narrative emanating from the White House. 1917 symbolizes American engagement in the world, while 2017 may illustrate the beginning of a potential American isolationism. The relationship between the two countries is over 200 years old. The French monarchy played an important role in assisting the patriots against the British crown. Benjamin Franklin played a considerable role starting in 1776 in engaging with France, while serving from 1776 to 1778 in a commission in France in charge of getting French support for American independence. France not only recognized American’s independence but as well concluded an alliance with the 13 colonies in 1778. Skipping one century, in 1917 when the Americans joined the war on the European continent, Colonel C. E. Stanton, General John J. Pershing’s aide, famously declared before the tomb of the Marquis Lafayette, ‘Lafayette, we are here!’ This brief historical anecdotes illustrate the deep ties and historical connections between the two countries. The ties go beyond the leader at the time.

Points of Convergence?

The intervention of the two presidents in front of the press lists the series of issues wherein the US and France have shared interests: the Ukrainian crisis, the war in Syria, counter-terrorism, free and ‘fair’ trade, and the sanctity of national sovereignty. Two additional items were on the agenda of the French president. The first one concerned the COP-21 or Paris agreement entered into force Fall 2016 ratified by 153 nations. President Trump announced early on his presidency that the US would withdraw from the binding deal. European leaders, in particular Chancellor Merkel and President Macron, have been adamant about the necessity to meet the goals set-up in order to address the root causes of climate change.

The second item, an unconfirmed point, may be regarding  potential American support to the initiative of the G5 Sahel bloc – Mali, Mauritania, Burkina Faso, Niger and Chad -, planning on launching a new multinational military force led by African powers. France has been militarily involved in the Sahel region since 2013 in order to limit the regional influence of Islamist militant group. This new force will operate in coordination with French troops and MINUSMA, Mali’s struggling U.N. peacekeeping mission. Financially, the European Union has pledged around 50 million euros, while France would contribute around 8 million euros by the end of the year. The US have played a role in providing equipments, information and military support to the French. This military effort aligns with the transatlantic counter-terrorist strategy. However, no comments on this point emerged.

Beyond the 14 of July – Perceptions matter

The Franco-American relationship has not deteriorated, but the French positive perception of the US as embodied by President Trump have collapsed over night. The recent Pew research center’s report on global perceptions illustrates clearly the instant changes of attitudes towards the US at the critical juncture of November 2016, the election of Donald Trump.

Global perceptions-1

The graph tells a compelling story of an immediate decline in the positive views of the US in a period of four months dropping by 15 percentage points (pp). The most damaging decline illustrates the confidence in the US presidency, wherein 74% expressed no confidence in President Trump, as opposed to 23% for President Obama.

Global perceptions2

 

This graph provides a global snapshot of the shifting perceptions between Presidents Obama and Trump. The only two countries with positive perceptions are Israel (+7pp) and Russia (+42pp). The rest of the world tends to share a lack of confidence in the American presidency held by Trump. The most critical are Sweden (-83), the Netherlands (-75pp), Germany (-75pp), South Korea (-71pp), and France (-70pp). Concerning the list of European countries above, President Obama had received strong support and a total admiration by Europeans. And this despite serious crises occurring during his mandate such as the Snowden revelations.

The last graph provides a snapshot over a longer period of time of the level of confidence in Western Europe (UK, Germany, France and Spain) in the American leader in power.Global perceptions3

President Bush never received considerable positive reviews from Europe. But the most damaging moment of his presidency, from European point of view, was the 2003 invasion of Iraq. The UK and Spain joined the coalition of the willing, which was not the case for France and Germany. The confidence in the US grew overnight ensuing the election of President Obama in 2008. The Snowden revelations were the lowest point for President Obama and the EU-US relationship during his two mandates. But the persona of Obama was sufficient in maintaining positive perceptions and confidence in the US in Europe. As the confidence ratings climbed overnight in 2008 by ~+60 pp, they dropped by ~60pp.

Trump or Not, the US Remains Central

As advanced in the report, President Trump is perceived, especially in France and Europe, as arrogant, intolerant and dangerous. The data proves that the US-Franco/Europe relations continues to remain strong despite the occasional disagreements. Regardless of the tenant of the White House, the United States remains the indispensable nation figuring at the heart of world affairs and geopolitics. In the case of Europe, the United States is a major contributor and guarantor of European security, through NATO and parallel transatlantic defense and intelligence ties. President of France positions himself as a pragmatist, as declared during his meeting with Vladimir Putin in June. It is in the interest of both countries to maintain strong political, diplomatic and cultural ties. France has a card to play with at this time considering the fraught relationship between the German and American leaders and the ongoing turmoils in the UK. The key for the French leader is to keep a balance between cooperation and independence.

(Copyright 2017 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).