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).

 

France, the sick man of Europe?

Photo by Chesnot/Getty Images
Photo by Chesnot/Getty Images

Maybe after all, Europeans do not deserve the European Union. Or maybe France does not deserve the European Union. The recent results of the elections in France for the European Parliaments send a serious signal to Europe, as there is a real misunderstanding of the role of the EU. Unfortunately, this result does not come as a surprise. With the vote of May 25, France’s role in shaping European policies and the EU has shifted from being central to marginal. For the first time in its history, France will not have enough deputies within the two largest European parties – right wing Europe People’s Party (EPP) and left wing Socialists & Democrats (S&D) – in order to shape policies in Brussels/Strasbourg at least for the next five years.

Source: The Independent
Source: The Independent

Throughout the last decade France has progressively moved in this direction of anti-European, anti-globalization, and anti-euro. This started in 2002 with the shocking victory of Jean-Marie Le Pen, the founder of the Front National (FN), at the first round of the presidential elections, followed by the 2005 ‘non’ at the referendum to the Constitutional Treaty, and now in 2014 with 25 percent for the Front National becoming the leading party in France in these European elections. Ultimately, one should wonder: What’s wrong with France? Why does France hate so much the European Union?

With 25 percent, the Front National (FN), the largest extreme right wing party, a neo-fascist party progressively transforming itself into a national-populist party, becomes the largest winner of these elections in France. This means that out of the 74 French euro-deputies, one third will belong to the FN, the anti-Europe and populist party. Marine Le Pen, the FN leader, is even self-proclaiming the FN as the ‘first party of France’ and has been calling for a shuffling of the government in accordance with the results of the European elections. This result has been perceived rightfully so throughout Europe and by French political parties as a ‘political earthquake.’ This earthquake with its epicenter in France was well felt throughout Europe as advanced in most European media. Right after the elections, European press was more concerned about the results in France than actually looking/speculating at the next Commission and Presidencies.

National parties

France is one of the founders of the EU with great men like Robert Schuman, Jean Monnet, Jacques Delors among others. France has greatly benefited from the EU and vice-versa. France has been unable for decades to have a normal relationship with Brussels fueled by a strong domestic belief, a sort of French exceptionalism, that France can exist and strive without the Union. Unfortunately, many French citizens take for granted the accomplishments of the Union and most importantly the maintaining of peace on the European continent. Apparently over 60 years of peace between great European powers, the longest period since 1600, is not that impressive for European citizens.

The argument that the EU is the cause of all problems is the wrong approach. Throughout contemporary history, nation-states have been the main causes behind instability, violence, repression, and economic and social inequalities. So how would retrieving into the nation-state, especially one envisioned by populist-extremist parties like the Front National, would finally bring back stability, peace, and serenity to its citizens? For instance, the FN agenda is misleading and absurd. Ms. Le Pen’s policies consist in assuring her bases that once in power, France will be able to reaffirm its identity and grow by itself outside of the EU. Let’s be clear, French economy cannot survive alone against the international forces of the market. FN policies consist in leaving the common currency, the euro; closing French borders to international trades and blocking the Transatlantic Trade and Investment Partnership (TTIP); making agriculture the pillar of the French economy; ending the Schengen agreement and reestablishing French borders to fight immigrants.

However, blaming the Eurocrisis on the results in France would only be looking at one side of the coin. They are several reasons behind such outcome: first, mainstream political leaders – right and left combined – should take a large part of the blame. With all these decades of perpetual euro-bashing, it is no surprise to observe French citizens finally voting against Europe. As argued by Jean Quatremer, France’s governments have been the first one to nationalize European successes and Europeanize national failures. The strategy of short-term gain has finally back-fired. Due to this perpetual euro-bashing, not only French psyche has grown anti-Europe, but also mainstream French politicians are unable to mobilize their bases when it comes to voting for Europe.

Second, French contemporary history is not very rosy as well. France has flirted more than once with extremisms and populism. We cannot forget the Dreyfus affair, the centuries of colonization, the 1920s fascist leagues, Vichy and the years of collaboration with the Third Reich, and recent immigration policies. France and its citizens have had a long history of attraction and implementation of xenophobic policies. It is a taboo, but a reality.

Third, no recent Presidents have been able to boost growth and re-give a sense of pride to a wounded country. Instead of implementing real structural reforms, mainstream politicians have tried to increase their electoral bases by wooing the extreme voters on all sides of the political spectrum. The result has been the normalization and incorporation of xenophobic, populist, extremist, mercantilist narratives promoted by the FN into mainstream political narratives. Additionally, French media have normalized such votes for extreme parties by calling them ‘protestation vote.’ Unfortunately, the rebranded FN led by Marine Le Pen, known as the wave Bleu Marine, has had trouble in splitting up with her father’s legacy. The latest antisemitic comments made by Jean-Marie Le Pen, Honorary Chairman of the FN and newly elected MEP, certainly underscores the continuous normative and ideational struggles within the party.

Fourth, in recent years, one of the favorite national sports has been abstention. In the case of the 2014 European elections, 57 percent of French citizens did not dare to vote. These abstainers were complicit in the rise of the FN in 2002 and now in 2014. Abstainers send a wrong message about democracy and republican values discrediting Democracy as a whole. Europe’s neighborhoods are in flame and European neighbors are fighting for the right to vote, meanwhile French citizens perceive it as a waste of time.

Turnout

At the end of the day, the European Union will survive. The center right European People’s Party (EPP) won 221 seats out of the 751 or 29%, followed by the Progressive Alliance of Socialists and Democrats (S&D) with 24%. As demonstrated by Daniel Gross, the EPP may have the most seats, but the S&D won the popular vote 24.4% for S&D to 23.9% for EPP. Based on the percentage of seats, conservative and pro-Europe leader Jean-Claude Juncker deserve to be selected as the next president of the Commission. However, based on the popular vote, the S&D leader, Martin Schulz, former President of the European Parliament, should get to head the Commission. But from now on, it will be politics as usual. European leaders that have called and argued in favor of greater democratic representation at the EU level are now facing a challenge: should Juncker be directly propelled at the head of the Commission in accordance with the composition of the European Parliament? Or, will the traditional ‘behind close doors’ strategy remain in appointing the next President of the Commission?

Seat per political groups

In any case the biggest looser of these elections is undeniably France, which has lost its European influence, its European credibility, and its voice in shaping policies in Brussels from the EP. France proportionality within mainstream European parties – S&D and EPP – is much lower than in previous years, but could be balanced by an increasing representation in getting one of the new high level official openings. France has been a pillar of the European adventure, but it now raises fear across Europe.

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

Rookie mistake or true colors?

Since January 2011, Marine Le Pen, who became the President of the Front National (also called FN), France’s far-right party, has been tediously working on changing the image of the party from its anti-immigration status to a respectable one. Her strategy has been to be more proactive on offering an alternative to mainstream parties, the UMP of Sarkozy and the Socialist Party, by tackling political, social and economical issues from a populist/nationalist approach. Ms. Le Pen has received intense media coverage since February, invited on many French TV shows, making the front page of mainstream French news magazines (such as Le Point, le Nouvel Obs) and articles in the international press (like the New York Times Magazine, and ranked as one of the most influential politicians in the Time). Ms. Le Pen has also been careful in removing the anti-immigration argument from the FN’s main narrative, making the party’s ideas more respectable and ultimately electable for the next presidential elections. Until her father, the Honorific President of the FN, commented on the terrorist attacks in Oslo couple weeks ago by claiming that the attack materialized the naivety of the Norwegian government. During his usual weekly comments on current events on the Front National’s website, he claimed that (see the video in French) (http://www.dailymotion.com/video/xk7t1p_le-journal-de-bord-de-jean-marie-le-pen-n-239_news#from=embediframe):

“the situation is grave not because of this ‘accident’ by an individual […]. But what seems more dramatic in this case is the naivety and inaction of the Norwegian government. […] The responsibility comes from the Norwegian government and society, which have fallen asleep in a comfort, provided by the hydro-carburant […] and did not take any measures against the global threat represented by mass-immigration, which seems to be the main cause in the mind of this ‘irrational’ murder.”

The respectable dimension of the party never clearly existed under the long-term presidency of Jean-Marie Le Pen, who created the Front National back in December 1972. His political life started in 1956 as Deputy of the Seine. He always received strong support in the South-East of France, a region with a large North African community, and was elected on several occasions at the European Parliament. His political apogee occurred in April 2002, when he made it to the second round of the Presidential elections with 16.86% of the votes. Mr. Chirac then defeated him in the second round by receiving 82.06% of the votes. Since January 2011, Mr. Le Pen enjoys an Honorific status within the party.

Mr. Charles Grant of the Center for European Reform wrote one of the best pieces on the true colors and values of the Front National under Marine Le Pen untitled, Marine Le Pen and the Rise of Populism. His article rightfully describes the true colors of the FN under its new president, Marine Le Pen. Here is his argument:

  • Ms. Le Pen presents her party as a nationalist, populist force
  • Strong anti-Europe message: if elected she would remove France from the Union and reinstitute the old currency, the Franc. The Franc would offer more independence and autonomy to the government in order to be more competitive as opposed to the Euro.
  • Implementation of protectionism in order to protect France’s industries
  • Removal from NATO’s structures

Let’s face it, this political platform is not attractive. France without the European Union and NATO would not last 10 years in this current international system. France has considerably grown under the military and economic umbrellas provided by the EU and NATO, ultimately allowing the country to maintain its status of middle-size superpower. France’s economy alone is not competitive enough to face the emergence of China and India or even its closest neighbor, Germany. Militarily speaking, the case of Libya undeniably proves that France cannot match its words with actions. The expectation-reality gap has become well too wide. France and the UK cannot sustain their military adventure in Libya without the support of NATO. The vision among the French political elite, even the non-conservatives, is that France is still a superpower with a vision, a strategy and a relevant voice on the international stage as illustrated by its seat at the UN Security Council, its leading of the IMF, and its EU, NATO, G8/G-20 memberships. Unfortunately, France holds these prestigious positions mostly thanks to its past and heritage rather than its present achievements. The FN tends to have a romantic, idealist vision of France blurring any rational thoughts.

In conclusion, democratic presidential races are always a very rocky ride. A year in advance, no one can predict seeing Ms. Le Pen or any other candidate making it through the first round. The 2002 elections are a perfect reminder of this argument, as former Socialist hopeful Mr. Jospin was supposed to face Mr. Chirac in the second round. History proved us otherwise. The French public opinion is not yet entirely focused on the message of each candidate and the elections in general. Only the strategic and drama-free candidates usually make it to the end. The French media have jumped to early on the wagon of change promised by Ms. Le Pen. The truth is that the first round of the French presidential elections is set for April 22, 2012, not September 2011. Furthermore, the Front National’s motivation and vision have not changed; the FN has just received a facial make-over. Jean-Marie Le Pen is here to remind us of the true colors of this party: fascism.