July 06, 2017
On Merkel’s imperial overreach
There is a lot of optimism among commentators about Europe at the moment, based on three factors: a cyclical economic upswing, uncritical adulation for Emmanuel Macron, and hatred for Donald Trump. As so often, we note that the news coverage is driven largely by the twin sisters of wishful thinking and confirmation bias - the fake-news equivalents in the realm of commentary.
There is a lot of commentary goading on Angela Merkel to seek a showdown with Trump in order to save the planet and the liberal establishment's version of globalisation. We share some of this sentiment in relation to its goals, notably on climate policy, but we think that the attempt to isolate Trump diplomatically is more likely to backfire than to succeed. Even Judy Dempsey, who supports a more assertive European diplomatic stance at the G20, acknowledges that Russia and Australia may side with Trump at the G20 summit on the Paris accord. There are also serious differences of views on how to co-ordinate counter-terrorism at the G20 level, and on migration policies.
The New York Times reports that efforts to isolate Trump are faltering. That does not surprise us. How can it be any different? How can the EU claim global leadership with its persistent beggar-thy-neighbour current account surpluses, its drain on global resources resulting from its lack of economic crisis resolution, and its members' refusal to adhere to their Nato spending commitments? Whatever other leaders may think of Trump, for many of them the US is and remains a more strategic partner in the long run. We agree that the EU should aspire to a global leadership role, but that would require a sharply different set of attitudes and policies as a starting point.
The New York Times also notes that Germany is giving up on hopes of an everyone-against-Trump G20 summit outcome. It says that Saudi Arabia is unlikely to support the majority in the G20 against Trump, while Russia, Turkey, and Indonesia, are sending mixed signals.
The US does, however, not appear to be seeking to destroy the Paris agreement, beyond pulling out itself. The article explains that an original draft of the "G20 action plan on climate and energy for growth" contains a passage in which the G20 supports the goals, while the US opposition is listed in a footnote. And then there is the communiqué, where the Trump administration is also resisting to be relegated to footnote status. The worst outcome for Merkel would be a failure to reach a common position, which would result in her having to summarise each country’s position separately.
We should also note the comments by the Turkish president, Recep Tayyip Erdogan, who said Germany’s decision not to let him speak at a political rally in Germany amounted to political suicide for Germany. He, too, is unlikely to rally behind Merkel.
We like the comment by Jeremy Shapiro who noted that there are a number of accidents waiting to happen. The fact that Trump sees no strategic purpose in his G20 participation does not mean that there will be no strategic consequences, he argues. If he pushes for LNG exports to Poland, this could drive a wedge between Poland and Germany, but would also annoy Russia, as it messes with the economic logic behind the Nordstream 2 gas pipeline project. And Trump could get mad about the many protesters he may encounter during his trip to Europe.
As world leaders descend on Hamburg, there is a quite a bit of diplomatic activity going on in the background. Germany’s and China’s commitment to a strategic partnership is mostly based on hot air - and a few commercial contracts. More significant is the EU/Japan trade agreement that was formally concluded yesterday, in time for the G20 summit. The agreement turns the EU and Japan into a giant free trade area affecting 99% of goods, including cars. The EU import levy of 10% is to be phased out over seven years. But, unlike the Ceta agreement, this Japan trade deal has no provisions for investor protection yet. This remains on the agenda, though. FAZ reports that the Commission still considers it an open question whether this is an EU-level agreement, or a mixed agreement.