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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European Adventure – The Missing Variable

Cartoon: Jasper Rietman
Cartoon: Jasper Rietman – New York Times, Dec 18, 2013

The Europe we live in today is the worst possible Europe apart from all the other Europes that have been tried from time to time. No European alliance, empire, commonwealth or community has endured forever, but we should want this one to last as long as it can – Timothy Garton Ash 

Politically, the European endeavor appears as fragile as ever. Pockets of populism (extreme-right and extreme-left combined) have been popping out since the collapse of the financial markets in 2007. But the recent results of elections in Sweden, Poland, the United Kingdom, Greece, France, Spain, Denmark and so forth are demonstrating that the European electorate is increasingly voting more extreme than before. In the case of France, the Front National, which was historically a party of opposition has become the “first party of France” to take her President’s words. If populism is becoming attractive, it has created a complex national debate of incomprehension and anger between populist voters and the mainstream rest. National unity, in France, Europe and even in the US, is under attack.

Experts and political analysts have been identifying a series of variables in order to explain the rise of populism such as immigration, terrorism, economic stagnation, high level of unemployment, corruption, cronyism, globalization and Europe. Each variable is highly valid and can explain what motivate Europeans to seek for extreme alternatives. But one core dimension has been missing and is most likely the strongest component: an adventure, a story (for Europeans) and a dream (for Americans).

Loss of Memory/Direction in a Ever-More Globalized World

Globalization has been framed as the foundation of all national turmoils and traumas. For populist movements the word ‘globalization’ is a toolbox with no clear definition for obvious political reason. The concept of globalization should be understood as an acceleration in the degree of interaction and interconnection between humans, capital and goods. To some extent, the physical world is shrinking; the speed in interaction is accelerating [distance-time are disappearing]. A smaller shared space ultimately affects the understanding of one’ space and culture.  In her recent address about the reflection on a common strategy, HR Mogherini framed the question of globalization from a security angle, which contributes to the reflection on the definition of the globalization in this piece. She said that:

Everything that is important to our citizens is influenced by our international environment. And there is actually no distinction, no borders, no line between what happens far away, what happens at our borders, in our region, and what happens inside our European Union. Even these categories are now losing sense. 

‘Losing sense’ is quite a powerful part of her statement. Populist movements are directly responding to this sensation of physical, emotional and ideational feeling of dizziness. In addition, populist movements argue that the European Union is in fact a materialization of globalization and its global forces weakening national unity. Unfortunately, this is not true if one takes a historical look at globalization bringing us back to the 14th century with the Dutch empire. Globalization has roughly emerged at the end of the Dark Ages and pushed the economic and political transition of Europe and North America into the pre-industrial world. Arguing that globalization is the root cause of all national traumas is an absolute fantasy considering the longevity of such phenomenon.

However, one should talk about the speed of globalization and its acceleration in the last 20 years. “We live faster than ever before” writes Svetlana Alexievich “Content ruptures form. Breaks and changes it. There are no borders between fact and fabrication, one flows into the other.” Certainly globalization has become a powerful force highlighting serious limitations and weaknesses of European foundations. If capital and people can travel quicker than ever before [in roughly 12hours a human can be on the other side of the world], and in a less than a second billions of dollars/euros can be wired from one continent to another, such forces can undeniably create serious problems to the slow-moving entity of the nation-state and the EU. These realities of an ever-more globalized world is creating a distortion between immediacy and reflection. Immediacy could be embodied by the current economic model of casino capitalism; while, reflection is in fact the foundation of European political regimes, Democracy/Republic. If casino capitalism is based on economic gamble informed by pseudo-rational thinking as it is more a question of rumors and speculation, democracy is a slow process of introspection, discussion, collaboration and compromise. The discrepancy between casino capitalism and democracy is obvious and stretching the limits of European societies. Here lays the core of the problem in the globalized world of the early 21st century.

Ultimately, when a politician like Marine Le Pen, president of the extreme-right party le Front National, tells a story of national sovereignty, national control through the construction of physical barriers and implementation of protectionism, these narratives attract a confused audience. But the lie is obvious, the building of physical barriers to block invisible forces won’t do a thing in order to solidify national sovereignty and empower cultural exceptionalism. Building physical barriers in order to limit the flow of people is a myth. Millions of Europeans went through the Atlantic Ocean, an ocean, for a better future; are a series of walls around Europe be sufficient to stop refugees to come in. Not a chance.

European Adventure

The story of the European construction is a remarkable story and endeavor. In the rumbles of Europe, visionary leaders and thinkers drove European politicians to follow their visions

Europe
Cartoon: Paul Lachine

in order to avoid another war that could destroy the world. World War two was one of the most vicious global fights with genocides, mass-movement of troops and civilians, arms and technological race and so forth. Over 40 million individuals died in six years leaving Europe as a massive field of destruction. From the agreement of the Treaty of Paris in 1951 to the Treaty of Nice in 2001, the European construction was far from perfect but it was an adventure for greater political, economic, and institutional integration. It was an adventure in order to horizontally expand the Community/Union from six original members into a Union of 28. It was an adventure as European citizens saw the fall of physical borders, from the Berlin War to national borders under the Schengen Agreement. It was an adventure when on June 7 and 10, 1979, European citizens could vote for the first time at a European election for the European Parliament.

It was an adventure as Europeans could finally move within a wide group of states in order to start a career, to start a European life, to study. It was an adventure as the continent saw an unprecedented economic boost bringing struggling states – Germany as one of them – into highly sophisticated and developed economic and industrial levels. It was an adventure in the agreement to share a common currency, the Euro, in order to facilitate commercial and financial transactions at first, and then the flow of people. It was an adventure as the Community/Union demonstrated the world that cooperation at its extreme did not undermine national sovereignty, but rather empowered it.

The Quest for a European Life

Today, the European adventure has become a European set of technicalities. The European adventure, which was at first bold and big, has become a highly technocratic and reductive vision of politics, finance, economics, and culture. Emotionally, European citizens are not opposed to the European Union, but are thrown off by the appeared and perceived distance between them and “Brussels.”populism-400x300

Europeans are in fact in search of meaning, a raison d’être. Unfortunately, this quest for a raison d’être is being hijacked by populist movements selling a past that never was. Populism, either fascist or communist, is attracting audiences – from elder voters to first time voters – because they are selling a ‘mission,’ a purpose to reconstruct a past that never was. Unfortunately, these populisms have no serious political, foreign, economic, fiscal, educational agendas. These populisms are simply selling smoke.

Instead of talking of clash of civilization – in order to identify a mythical clash between Western societies and radical islamic movements, which do not speak for societies with a majority of muslim citizens – experts should be talking of a civilizational depression. Instead of seeking for external enemies, Europeans should be looking within, inside and reflect of this European state of confusion. Europe may be simply dealing with its mid-life crisis. Now it is a matter of avoiding a complete divorce with a supposedly dark and repressive past, the European integration process.

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