- Europe's World
Joe Zammit Lucia is a co-Founder and Trustee of Radix, the Think Tank for the Radical Centre and co-author of ‘Backlash: Saving Globalisation From Itself’
Angels and demons. Heroes and villains. They have charmed and enchanted us for centuries. But these seductive narratives are best left where they truly belong, in the world of fiction. They become dangerous when they infect the world of ‘realpolitik’. Particularly so since we are all fully capable of deluding ourselves that we are the ones who are on the side of the angels.
Europe has become infected with such a delusion. As a result, it risks committing a historic mistake – undermining the transatlantic relationship. Europe now seems in danger of starting to believe its own fable; that it is the hero defending a rules-based world order against a villainous President Trump.
For decades the large majority of European countries have disdained their obligation, within NATO, to contribute two percent of GDP to national defence. Successive US administrations have looked the other way and, still today, guarantee European defence and security with US tax dollars and shared intelligence.
When it comes to trade, Germany is second only to China in implementing restrictive trade practices. Both Germany and the Netherlands have consistently broken EU trade balance rules while the Commission has stood idly by.
Germany and the Netherlands have consistently broken EU trade balance rules
Any attempt by the European Union to take the moral high ground by wrapping itself in the blanket of a rules-based order, will strike many as hypocritical at best.
It is untrue that President Trump is destroying the post-war world order. That order is over, with or without Trump. The rules that underpinned it were designed for a multilateral world, steered and guaranteed by US hegemonic power. This was similar to the system that went before it, one instigated by British imperial might.
Today, there is no hegemonic power that can act as a guarantor of world order. Rather, the world is coalescing around three blocs: the US, China and the EU. A fourth bloc consisting of Russia, Iran and Turkey might yet emerge.
Since the 1980s, it has been clear that such a world is more likely to lead to competition between blocs, rather than a co-operation guaranteed by the iron hand of one single hegemon. The negative consequences of such competition are potentially severe.
In addition, trading rules were developed on a Western template of free competition and open markets operating largely separately from the state. China now has a new model – state-directed capitalism. The old world-order no longer works when the world’s second biggest economy does not operate in the way envisaged by the outdated rules.
As we enter this delicate period, Europe and the US are obvious allies and partners. In spite of their differences, they continue to share common values and world views. The transatlantic alliance remains a vital bulwark of democracy and shared interests across the globe. It also remains vital to underpinning the success of the European project.
As we enter this delicate period, Europe and the US are obvious allies and partners
Europe finds itself in a perilous moment as divisions are there for all to see. It is losing one of its most important and globally influential member states, the United Kingdom. Eurosceptic parties are gaining ground in member state governments and seem ever-more determined to stand up to the Brussels consensus. China’s Belt and Road Initiative and the promise of investment at a time of shrinking EU budgets, act as a siren song to some in Eastern Europe.
Europe remains unable to guarantee its own defence and security. An increasingly unstable Middle East lies on its doorstep. Two and a half million refugees wait in Turkey; a number that could unleash chaos in Europe if Turkey were to allow passage to Greece. Not to mention the hundreds of thousands attempting to cross the Mediterranean and exposing deep political fissures within the EU. Europe is also attempting to do what has not been done before: project power without any credible military capability. It is not clear whether it can succeed.
Given these realities, the last thing that Europe can afford is a severe transatlantic rift that may well fatally wound the European project.
There is little doubt that President Trump’s actions over Iran and EU-US trade are provocative. The question is: how should Europe react?
Where trade is concerned, we should all start by accepting that large, unidirectional trade imbalances are unsustainable on the political, social and economic level.
The Trump administration’s approach of slapping unilateral tariffs is flawed. It is unlikely to work and may be counter-productive. However, it may be possible to start work on a joint approach if Europe were to admit that the rules need changing in a changed world and accept the principle of trying to reduce trade imbalances. Europe’s current position of trying to maintain its positive balance by hiding behind ‘the rules’ is not credible, sustainable or fair. In essence, Europe is asking the American taxpayer to not only keep funding their defence and security by keeping NATO afloat, but also a widening trade imbalance.
The Trump administration’s approach of slapping unilateral tariffs is flawed
The US, China and the EU should enter a tripartite discussion on how to re-cast international trade rules so that they are fit for a 21st Century world in which one major trading block has chosen a different political path to that put forward by the West and embodied in the WTO.
Iran represents a more difficult issue. Europe cannot afford further escalation in the Middle East. However, it is not clear that a rift with the US will do much to guarantee peace in the region. The German government’s call for a cautious response seems more sensible than the European Commission’s rush, seemingly encouraged by France, to implement age-old ‘blocking statutes’ that will escalate the conflict while having little or no practical effect.
We Europeans should think long and hard about the consequences of a break with America. It is worth remembering that Europe as we know it today would not exist were it not for America (and Britain). And we have been here before. In the early 70s, the ‘Nixon shock’ included a unilateral 10% surcharge on all dutiable imports, a 10% reduction in foreign assistance expenditures and closing the ‘gold window’. The aim, as with Trump, was to create a sufficient shock to force others to the negotiating table. Nixon’s Treasury Secretary John Connally famously stood up in Rome in 1971 and told the Europeans, “The dollar is our currency but your problem.” The US abandoned the gold standard, the Bretton Woods system collapsed and threw Europe into disarray. But the alliance survived.
In what will inevitably be a more unstable and unpredictable world, a strong transatlantic alliance will remain crucial to European interests for many decades to come – irrespective of any short-term disagreements.
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