Comment: Transatlantic trade relations after the US elections

Whoever ends up winning the election in the United States, the European Union now urgently needs to put serious security and geostrategic thinking first and avoid using its trade policy as an easy ‘ersatz’ for genuine security and international diplomacy, argues Borderlex’s founder Iana Dreyer.

Gone are the times of innocence when policy ‘wonks’ could produce relatively easily policy recommendations and predictions after a United States election and tell everyone what to expect and what to do in transatlantic trade relations.

Gone too are the times when one could lose oneself in the minutiae of trade policy whilst ignoring wider security and geopolitical issues on the transatlantic arena.

What needs to be done on the transatlantic trade beat

What is needed to uphold European and US prosperity and global geo-economic clout is not difficult to list.

We need a strategic dialogue on trade, with attempts at eliminating tariffs, reducing non-tariff barriers and resolving trade frictions related to steel and aircraft disputes. Perhaps more importantly, the two sides need to start a serious conversation about data flows and the regulation and taxation of the digital economy.

The EU and US also need to talk more seriously about energy security, environment and climate change. The two sides also need a common strategy to address the challenges posed by China’s rise and a common approach to handling the ever-deepening problems at the World Trade Organization.

The received wisdom right now is that a Biden administration would be more amenable to a conversation with its political allies across the world as it will seek to focus US geo-strategic energies on China.

The common view in Democratic circles is also that Joe Biden and his team value multilateral institutions and the WTO, even if they have the desire to change them. A Biden administration is also expected to bring the US back into the Paris Agreement on tackling climate change – a move that would facilitate the trade conversation with Europeans. US national security tariffs on steel and aluminium imposed on NATO allies would also likely go.

Speaking at an event in October, Tony Gardner, a former US ambassador to the EU who has been involved in the Biden election campaign explained the thinking displayed in the party’s working groups on foreign affairs. “How can we do a foreign policy – in particular trade – for the middle class? How can we show that working with allies produces better results than undermining, insulting allies and breaking rules and institutions and negotiate bilaterally and transactionally?”

Gardner also said: “Under a Biden administration I think we will see a view that the EU is an essential partner.”

There is even talk of Biden making his first international trip as president to Europe, with Berlin and Brussels as first ports of call.

In an ideal world, that new transatlantic dialogue would need to be triangular and include the post-Brexit United Kingdom.

But what now?

But is such a new dialogue what we are going to get?

At the time of publication of this article (around 18.30 CET on 4 November 2020) it looks like the US presidential elections watched over here in Europe with great trepidation will be a highly contested affair.

If things go relatively smoothly and the remaining swing states that continue counting their votes as we speak do come up with expected results, then the US electoral college will be in a position to pronounce Joe Biden as the United States president in early December. Biden as president would however have to face a divided Congress anyway and an obstreperous Republican party-dominated Senate. The Republican party itself would continue to be run by the party’s now dominant pro-Trump clique.

This is the best case scenario.

The worst case scenario is a Trump win – still possible as we speak. Or Trump’s refusal to concede backed by a Supreme Court that might play a partisan card.

There is little to sigh about in relief in leadership circles in Europe. The US election will have existential consequences for Europe regardless of how the current power transition plays out.

To Cathryn Clüver Ashbrook, executive director of the Future of Diplomacy Project at the Harvard Kennedy School, the United States is potentially heading towards a constitutional crisis. Such a scenario would raise “fundamental questions for the transatlantic alliance, the integrity of NATO, and for the collaboration in multilateral institutions,” Clüver said at an event hosted by the German Marshall Fund on Wednesday (4 November).

Thomas Kleine-Brockhoff, vice president of the German Marshall Fund and director of its Berlin office believes that the elections have given the Trump administration’s international policies – of which the EU has been at the receiving end – a big political boost in the country, even if Trump himself does not become president. “We still have a divided nation and we must count with domino effects in Europe.”

That view is echoed by Jim Kolbe, a former member of Congress from the Republican party. Even under a Biden administration, “the US will not be able to assume a real role of leadership in the world that we once had,” said Kolbe.

A new Trump administration would be expected to turbo-charge its current international policies and its overall hostile policies towards the European Union project.

It is clear that the EU will need to do much deeper thinking about its global security and place in the world than before.

The heavy lifting and initiatives will need to come out of Berlin. Despite four turbulent years of relationships with the Trump administration – which has targeted Germany in particular – Berlin is perceived as largely passive and reluctant to embrace new tasks and responsibilities.

France’s Emmanuel Macron’s talk about “European sovereignty” is met with derision and suspicion in Berlin. But perhaps it is also taken too literally: it is high time we see something substantial and workable at European Union level come out of Berlin. Merkellian ‘strategic patience’ and 1990s style empty slogans from the German defence minister on the essential EU-US security partnership no longer work.

Some German internationalists start believing it his high time to change tack. “We will need to make a programmatic proposal to ourselves, our European friends and our transatlantic friends,” said Peter Beyer, current coordinator of transatlantic affairs at the German Bundestag. “We must, here in Germany, think how we pull ourselves together.”

Beyer says Germany needs “a form of national security council”. Beyer added: “We can’t continue to work the same way as before. We urgently need better coordination of foreign, security, energy and international economic policy in one single body. This is decisive.”

So, what comes next?

Nobody can really pretend to know.

Risk of a European inward-looking drift

What is clear, without a US ‘counterweight’ and engaged – if demanding and difficult – friend, the EU will most likely embrace a more inward-looking and defensive international trade policy.

This will be worsened by a geostrategic outlook that is still in its infancy. Brussels new mantra is to seek to boost its ‘open strategic autonomy’, at times forgetting the ‘open’ dimension of it.

But is this enough? To tackle transatlantic relations – either in responding to a deeper Trump-induced NATO crisis or seeking a reset with a Biden administration – the NATO and security dimension needs to be part of the equation and here Brussels has strictly no answers to offer. Positive, ‘win-win’ trade policy outcomes will fall into place as a consequence of such thinking and action – not the other way round.

The EU drift towards an inward-looking approach will start in the area of digital services and investment, where the trend has already begun. Not trusting anyone politically and geopolitically – the EU will not be in a position to lead e-commerce negotiations to a conclusion in the WTO and will seal itself off in the vital data field. Schrems II, the latest Court of Justice ruling on transatlantic personal data flows, isn’t helping the EU make the case for a more open international data flow policy.

The EU’s talk of open strategic autonomy and more resilient supply chains will be more likely to drift towards  protectionist industrial policies as political pressure to become less ‘dependent’ on others will grow and crisis-stricken industrial vested interests will jump on the occasion to take a piece of the shrinking economic pie and global industrial supply chain playing field.

Also, with no geopolitical vision, trade policy will be increasingly used as an ersatz for proper international diplomacy. On climate a ‘punitive’ approach based solely on carbon border adjustment will backfire with partners and likely bring little results in terms of CO2 reduction.

Short term, the risk is that the EU adds fuel to the burning fire.

If press reports are true, the EU might press ahead with tariffs on US imports following the WTO’s ruling on US compliance with Boeing on Tuesday next week (10 November). The EU says it wants to find a settlement with the United States on subsidies in the aircraft sector but would proceed with retaliatory tariffs if the talks fail. Of course these aircraft subsidy talks will fail with the Trump administration.

But mightn’t it be wiser to wait and see who the EU will be talking to come January next year?

What we need more fundamentally is genuine policy shifts on international security in the EU, a credible ‘security union’ that tackles great power divide-and-rule games, cyber, terrorism and defence more seriously, in Brussels but also in key European capitals. This is, alas, above the paygrade of trade policy professionals.