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January 17, 2020

The world has discovered how to blackmail Germany

After the Trump administration threatened tariffs on German cars over Iran, it is now China that makes the same threat in respect of Huawei. The world has discovered that Germany, and by extension the EU, is vulnerable to mercantilist threats. This is what happens when trade surpluses are not merely occurring but they are an essential part of your overall economic strategy. 

The New York Times quotes a member of the digital affairs committee of the Bundestag as saying that the Chinese have made it clear in private conversations with German officials that they will retaliate where it hurts - against the car industry. Earlier China's ambassador to Germany also warned that there would be consequences, but without spelling them out. The privately-issued threat seems to have become a prime tool in international diplomacy. The Washington Post reported this week that the US administration had threatened EU officials that Washington would impose car tariffs unless the EU agreed to trigger the arbitration procedure in the Iran nuclear deal. 

Angela Merkel is, as ever, leading from behind. The decision is ultimately up to the Bundestag. There is strong opposition to Huawei from the pro-Atlanticist lobby in the CDU, most notably from Norbert Rottgen, head of the foreign affairs committee. One of the US arguments against Huawei’s German bid is that car companies will in the future carry lots of personal data from drivers, and Germany would effectively make these data available to the Chinese communist party. 

Rottgen made another especially important point, from our perspective. If you allow Huawei into Germany, you would undermine European unity and indirectly damage the two northern European competitors to Huawei. From a strategic point of view, this is a classic case where the EU should stick together, prefer the European option, and be willing to accept that it may be more expensive, slower and less convenient. 

We think, however, that the odds favour Huawei. German foreign policy has been mercantilist, not strategic. Germany and France always prioritise their own narrow industrial interests over the European good. 

Nor should we overestimate Rottgen’s influence and position. He is one of those CDU people who gets quoted in English-speaking media, but his views do not necessarily reflect the majority in the Bundestag, and perhaps not even in his own group. The CSU is in favour of Huawei. The CDU is split. The SPD is traditionally the car and coal party. The Germans may also conclude that US car tariffs are hard to avoid in any case. 

And public opinion has become unbelievably anti-American. We note a Deutschlandtrend poll according to which 57% of Germans have no trust whatsoever in the US, while only 25% say the same about Russia.

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January 17, 2020

Fideszit?

Politico notes a potentially revealing vote in the European Parliament, on a resolution to criticise the European Council for failing to address rule-of-law issues in Poland and Hungary. Of the EPP MEPs, 99 supported the motion, 24 non-Hungarian MEPs were against, and 21 abstained. This suggests that there is now probably a majority in the EPP in favour of full expulsion of Fidesz, whose allies in Brussels include Forza Italia, Spain's PP and Les Républicains in France. 

The vote itself will not change anything, but it acts as a useful poll of how opinion in the EPP group is shaping up. A decision on the future of Fidesz in the EPP is due in the next few weeks. 

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