A helpless and pitiful giant?

European leaders are frustrated and mystified by Donald Trump, very angry and terrified by him and his seemingly uncontrollable anti-European outbursts, his wrecking of more than 70 years of North Atlantic collaboration. At the same time when push comes to shove they are more or less helpless against him.

Of course, the official message from Brussels is that the meeting last week between Jean-Claude Juncker, president of the European Union (EU) Commission, and the US president was quite successful, mentioning a pledge by the US to hold off on tariffs on cars built in the EU — so a sword of Damocles will be kept hanging on the Europeans instead of falling immediately on them.

Looking closely at what has transpired about the outcome, it was mostly — to quote one EU official — “talks about talks” and pledging to open negotiations on zero tariffs and non-tariff barriers on industrial goods, apart from cars and car parts — which is of course the caveat that Germans would not want to hear about because they are concerned about tariffs on their car exports to the US, which is one of their most important and profitable markets. In addition to that, French President Emmanuel Macron has already made it clear that he does not want to hear about such a negotiation before the US cancels its “illegal tariffs” on EU exports, and he does not want more US agricultural products into Europe to compensate for what American farmers will lose from the tariffs now imposed on their products by China.

Illustration by Ajay Mohanty
In the same way, the recent signing of the Economic Partnership Agreement between Brussels and Tokyo was hailed as a major response against American protectionist policies. As positive as this development is, one should keep in mind that the EU exports goods and services worth €86 billion to Japan against more than €600 billion to the US. So, diversification of trade relations will have to go a very long way to help the EU protect itself from the impact of new protectionist moves from a Donald Trump obsessed by the huge trade deficit the US has with the EU and China.

However, the key question to be asked is why the EU, a supposed economic giant whose GDP, at $19.5 trillion, is equal to that of the US, remains so vulnerable to the whims of the US president. The answer lies in three strategic mistakes made over the last 30 years by the Europeans.

The first one was — out of shortsightedness, wishful thinking and lack of political will — to do nothing to reduce Europe’s total dependency on the US for its defence and security. Europe is now paying dearly for its illusions, at the end of the cold war, when it was talking about the so-called “peace dividend” and entertaining the fallacy of having entered a “post-conflict” era.

This same attitude continues today, even when European leaders keep crying wolf about Russian President Vladimir Putin’s intentions and actions. German Chancellor Angela Merkel can say that “Europe has to take its fate into its hands” but the reality is that her country — number one economic power in Europe — has a ridiculous military budget compared to is GDP and that, according to a report from Berlin’s Parliamentary Armed Forces Commission, Germany's lack of military readiness has now reached “dramatic” proportions. Only four of the Luftwaffe’s state-of-the-art Eurofighter jets are able to go into operations, according to the German magazine Der Spiegel. And Mrs Merkel’s government is planning to increase the defence budget by €4 billion over the next four years. Only France and the UK in Europe can today be considered as militarily credible. 

So, no surprise that Mr Trump — and Barack Obama before him — consider the Europeans to be free riders on defence. And no surprise that now Mr Trump — breaking with a long-standing US policy — is establishing a linkage between defence and trade when dealing with Europe because he knows he can leverage Europe’s self-created vulnerability.

The second strategic mistake is that, by and large, the EU has been pursuing a very mercantilist approach to international economic relations. And because of its weight as the continent-overwhelming economic power, Germany continues to play a very detrimental role in that respect: It keeps pursuing a growth model driven by exports, by the compression of domestic wages and often politically motivated lending by the landesbanks (state-owned regional banks). This is very similar to the growth model that China was criticised for pursuing and from which it is now shifting. The enormous current account surplus of the euro-zone — $483 billion, of which Germany’s own surplus accounts for 60 per cent — is a major cause of imbalance in the world economy and can only invite pressures from a huge deficit country such as the US, which is now keen to use the military protection it provides to force corrective measures on countries benefiting from this protection. And it does not matter whether one considers if such linkage should be made or not. The fact is that the US president is making it and it would be very illusory to bet on a change of mind from his part.

The third strategic mistake has been for the EU to continue expanding its membership even though many new entrants were obviously not prepared to “fit” into the structures, values, objectives of the founder countries. The EU today has 28 members and is considering candidacies from Albania, the former Yugoslav Republic of Macedonia (fYRoM), Montenegro and Serbia. A key criterion for admission is the candidate countries’ ability to transpose and implement the EU legislation by the time of completion of their membership. This, however, misses completely the crucial point of whether the new members will be able or really willing to align themselves with the other members when it comes to the way the European Union should deal with external challenges. It suffices to see today how a number of Eastern members of the Union are, for instance, having a different approach to Russia or are making their own deals with China — in disregard of what is supposed to be a common European policy on this matter, thus weakening the European position towards Moscow or Beijing. The Trump administration knows very well that beyond general positions articulated by Brussels in its negotiations with Washington, it will be able to draw a wedge among EU members when it comes to specific negotiating positions.   

Will Europe ever learn from its mistakes and past wishful thinking? There is so far more rhetoric than political will and action. And the rigid attitude taken by Brussels on the negotiations with London about Brexit does not bode well for the ability of the EU to consider what would really help reinforce its stance in the world — and vis à vis the US.

The writer is President of Smadja & Smadja, a Strategic Advisory Firm
@ClaudeSmadja



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