Europe in Disarray


December 15, 2018

Europe in Disarray

In what by historical standards constitutes an instant, the future of democracy, prosperity, and peace in Europe has become uncertain. And with the US under President Donald Trump treating its allies like enemies, the continent must confront the growing threats it faces largely on its own.

 

NEW YORK – It was not all that long ago – just a few years, as hard as that it is to believe – that Europe appeared to be the part of the world most closely resembling the end-of-history idyll depicted by Francis Fukuyama at the end of the Cold War. Democracy, prosperity, and peace all seemed firmly entrenched.

 Not anymore. Parts of Paris are literally burning. The United Kingdom is consumed and divided by Brexit. Italy is led by an unwieldy left-right coalition that is resisting EU budget rules. Germany is contending with a political realignment and in the early phases of a transition to a new leader. Hungary and Poland have embraced the illiberalism seen across much of the world. Spain is confronting Catalan nationalism. And Russia is committing new acts of aggression against Ukraine.

In what by historical standards constitutes an instant, the future of democracy, prosperity, and peace in Europe has become uncertain. Much of what had been widely assumed to be settled is not. NATO’s rapid demobilization after the Cold War looks premature and precipitous.

There is no single explanation for these developments. What we are seeing in France is populism of the left, the result of people having difficulty making ends meet and rejecting new taxes, whatever the justification for them. This is different from what has fueled the rise of the far right across Europe: cultural defensiveness amid local and global challenges, above all immigration.

The European Union, for its part, has gradually lost its hold on the public imagination. It has been too remote, too bureaucratic, and too elite-driven for too long. Meanwhile, renewed Russian aggression may simply reflect President Vladimir Putin’s judgment that, having realized large political returns on his previous military “investments” in Ukraine and Syria, he had little to fear or lose from further actions.

Europe’s political class deserves its share of responsibility for today’s growing disarray. The EU introduced a common currency without a fiscal or banking union, making it all but impossible to conduct a coherent economic policy. The decision to put the UK’s continued EU membership to a popular vote, while allowing a simple majority to decide the issue and failing to spell out the terms of departure, was misguided.

Likewise, opening Germany’s borders to a flood of refugees, however pure Chancellor Angela Merkel’s motives, was sure to trigger a backlash. Most recently, French President Emmanuel Macron did himself no favors by backing down to the “Yellow Vest” protesters and offering compromises more likely to fuel additional demonstrations and exacerbate his country’s budget predicament.

We should not assume things will get better. It is only a matter of time before France’s far-right National Rally (formerly the National Front) and political parties across Europe figure out how to combine economic and cultural populism and threaten the post-World War II political order. Italy’s hybrid populist government is a version of just that.

The UK will remain torn over its relationship (or lack thereof) with the EU no matter what comes of Brexit; and it is entirely possible that a post-Brexit UK might come under serious strain itself, given renewed calls for Irish unity and Scottish independence. There is no formula for dividing power between Brussels and capitals that would be acceptable to both the EU and national governments. Meanwhile, it is far from certain that Putin is content or done with his aggression against Ukraine or conceivably others.

Moreover, in a world of increasing inequality, violence within and between countries, and climate change, the pressures posed by immigration are more likely to worsen than fade away. And economic dislocation is bound to intensify in a world of global competition and new technologies that will eliminate millions of existing jobs.

Why this matters should be obvious. Europe still represents a quarter of the world’s economy. It is the largest constellation of democratic countries. The last century demonstrated more than once the cost of a breakdown of order on the continent.

Alas, just as there is no single cause that explains Europe’s increasing disarray, there is no single solution either. To be precise, there is no solution of any sort. There is, however, a set of policies that, if adopted, would help leaders manage the challenges.

A comprehensive immigration strategy that balances security, human rights, and economic competitiveness is one such policy. A defense effort that focuses more on how money is spent than on how much is needed would go a considerable way in buttressing Europe’s security. Moreover, deterrence should be strengthened by bolstering NATO and further arming Ukraine. Weaning Europe from Russian natural gas makes sense as well, which implies halting the Nord Stream II pipeline that is meant to bring gas directly from Russia to Germany, bypassing Ukraine. And additional retraining programs are needed for workers whose jobs will disappear as a result of globalization and automation.

Much of this agenda would benefit from American involvement and support. It would help if the United States stopped viewing the EU as an enemy and NATO allies as free-riders. Europe includes the countries most prepared to work with the US to deter Russian aggression; integrate China into global trade and investment frameworks on terms consistent with Western interests; mitigate and, where necessary, adapt to climate change; and set rules of the road for cyberspace.

Alas, such an approach is unlikely to be forthcoming from Donald Trump any time soon. That leaves Europe with no choice but to confront its disarray mostly on its own.

A Second Chance for Britain


December 12, 2018

A Second Chance for Britain

by

https://www.project-syndicate.org/commentary/second-brexit-referendum-for-britain-by-ian-buruma-2018-12

anti-brexit second chance

In 1950, the British reacted with a mixture of horror and disdain to the proposed European Coal and Steel Community, suspecting a French plot to lure a pragmatic people into some utopian foreign project. The basic arguments against “Europe” have not changed at all since then, unlike the consequences of acting on them.

Image result for theresa may

May Mrs.Theresa May remain Prime Minister Of The United Kingdom

In 1950, the British reacted with a mixture of horror and disdain to the proposed European Coal and Steel Community, suspecting a French plot to lure a pragmatic people into some utopian foreign project. The basic arguments against “Europe” have not changed at all since then, unlike the consequences of acting on them.

NEW YORK – On May 9, 1950, when European countries were just beginning to emerge from the ruins of war, the French statesman Robert Schuman announced his plan to create the European Coal and Steel Community. By pooling these vital war materials under a common European authority, violent conflict between France and Germany would become unthinkable. The Germans were delighted. The Benelux countries and Italy would take part as well. A first step toward a European union had been taken. Shortly after Schuman’s announcement, the British were invited to join in the discussions.

They reacted with a mixture of horror and disdain, suspecting a French plot to lure a pragmatic people into some utopian foreign project. The Labour Party, then in power in Britain, couldn’t imagine sharing sovereignty over the United Kingdom’s vital industries. And Conservatives failed to see how a global power could possibly be part of such a narrow European club. It was all very well for the Continentals to band together. But Britannia would continue to rule the waves, together with the other English-speaking peoples in the Commonwealth and the United States.

It is easy, in hindsight, to mock the British for missing the European boat with such blithe arrogance. But it is at least understandable. After all, the British with their proud democracy had stood alone against Hitler’s Germany and helped to free the European countries that had surrendered to the Nazis. One cannot really blame them for feeling a trifle superior.

What is depressing, however, about the Brexit disaster that is making such a mess of British politics now is that the basic arguments against “Europe” have not changed at all since 1950. Jeremy Corbyn’s Labour Party ideologues view the European Union as a capitalist plot to undermine the purity of their socialist ideals. And Brexiteers on the right still dream of Britain as a great power, whose global reach should not be hampered by membership of European institutions. Another strand of nationalism, which is more English than British, is the romantic attachment to a “special relationship” with the US.

Alas for the British, the world has changed a great deal since 1950. The British Empire is over, the Commonwealth is little more than a sentimental relic of the past, and the relationship with the US may be very special to the English, but it is much less so to the Americans.

But something else, perhaps even more important, has changed as well. When the British government turned down the chance in 1950 to help shape Europe’s future, some Conservatives criticized Labour for being a bit too hasty. As the opposition, the Tories had to say that. But their hearts were not really in it, for, as the New York Times reported at the time, the government’s position “reflects a good deal of British feeling toward Europe, regardless of party lines.”

Britain – if not every part of England – is now a much more European country. London in 1950 was still a completely British city, where “aliens” were a distinct minority. In the last decades of the twentieth century, it became the unofficial capital of Europe. More than three million Londoners are foreign born, with hundreds of thousands of young Europeans working in banking, law, fashion, catering, the arts, and many other industries. London has a larger French population than many French cities.

No wonder, then, that the majority of Londoners voted to remain in the EU. And so did most young people in Britain who bothered to vote in the referendum. The Britain of 1950 would be unrecognizable to them.

So who are the 51% who voted to leave the EU? And why? Protecting socialism has limited appeal, as do ideals of pure national sovereignty or fantasies of Britain striking out alone as a global power. Fear of immigration appears to be the main reason why people voted to leave. In some cases, this stemmed from genuine worries that Eastern European builders, say, were making it harder for British citizens to do the same jobs for a decent wage. But very often, the people who are most afraid of being “swamped” by foreigners live in areas where immigrants are very few.

At the same time, most British citizens take it for granted that they are nursed and treated in hospitals by immigrants, served in supermarkets by immigrants, and aided in banks, post offices, social service centers, airports, and public transport by immigrants. Without immigrants, the British economy and services would collapse.

Some pro-Brexit politicians have stoked immigration fears more brazenly than others. The most notorious image used in the Brexit campaign was a poster showing a stream of young men, looking vaguely Middle-Eastern, with the text: “We must break free of the EU and take back control.” In fact, the young men in the picture were nowhere near the UK’s borders. The photograph was taken in Croatia.

The more respectable Brexiteers talk more about sovereignty than immigration. Their anxiety about losing control may be genuine. Figures like Boris Johnson, with his Churchillian pretensions, or Jacob Rees-Mogg, who resembles a minor character in a P.G. Wodehouse novel, are anachronisms. In earlier times, they might have run an empire. Now they are mere politicians in a middle-ranking state.

Brexit for the likes of Johnson or Rees-Mogg is more like a deluded grab for power, undertaken in the name of the common people, supposedly in revolt against the elites of which these politicians are themselves conspicuous members. Their nostalgia for grander forms of rule has already done great damage to the country they claim to love. This is all the more reason, now that the potential catastrophe of Brexit is so plain to see, why those common people should have a second chance to vote for a way to avoid it.

 

 

The Brexit Endgame


October 17, 2018

The Brexit Endgame

https://www.project-syndicate.org/commentary/brexit-endgame-temporary-customs-union-by-robert-skidelsky-2018-10

Britain’s Leave campaign was a revolt against not only economic mismanagement, but also the pretension of supranational government. So Brexit’s outcome may indicate how the dialectic between supranationalism and nationalism will play out in much of the rest of the world as well, where it is the stuff of current politics.

brexit eu flag

 

LONDON – The United Kingdom’s “Remainers,” who still hope to reverse Britain’s decision to leave the European Union, have placarded British cities with a simple question: “Brexit – Is It Worth It?” Well, is it?

And yet economics also clearly shaped the decision. The Brexit propagandists brilliantly channeled palpable economic resentment, especially against immigration, into hostility toward the EU. But the resentment was against the home-grown damage inflicted on the British economy by its neglectful rulers. As Will Hutton and Andrew Adonis accurately note in their recent book Saving Britain, “Our problems are made in Britain; they can only be solved in Britain. Europe does not impede this mission…”

But Hutton and Adonis miss Brexit’s crucial non-economic dimension. They rightly recall the long and intimate relationship between Britain and the European continent. But Britain has never been part of a European state. Although the European Union is very far from being the “superstate” of Margaret Thatcher’s nightmare, its governmental aspirations lack legitimacy, not just in Britain, but among many of its members. Despite talk of European citizenship, politics remain obstinately national. Britain’s Leave campaign was a revolt against not only economic mismanagement, but also the pretension of supranational government.

So Brexit’s outcome may indicate how the dialectic between supranationalism and nationalism will play out in much of the rest of the world as well, where it is the stuff of current politics.

The Brexit endgame itself is far from clear. There are four possibilities.

One possibility is that Britain doesn’t leave the EU after all. The organizers of a campaign for a “people’s vote” – a second referendum on the final exit terms – believe that when people know the true cost of leaving, they will reverse the decision taken in 2016. A second vote could be triggered by the government’s failure to win parliamentary approval of the divorce settlement it has agreed with the EU.

A second possibility is that Britain “crashes out” of the EU on March 29, 2019, with no divorce deal. In this case, forecasters paint a doomsday scenario of economic collapse, gridlock on roads and rail, shortages of food, medicine, and fuel: 1940 all over again (but not exactly Britain’s finest hour).

Image result for brexit chequers plan“Half in, Half out”. Why not Out!

“…the Chequers plan for a continuation of free trade in goods between Britain and the EU. Britain would make sure that goods entering Northern Ireland, but bound for the EU via the Republic of Ireland, paid their EU customs duties and conformed to EU health and safety standards. “–Lord 

British Prime Minister Theresa May’s government is promoting a third possibility: half in, half out. Approved by the Cabinet in July at the Prime Minister’s country house, the so-called Chequers Plan proposes that when Britain leaves the EU, the two sides enter into a free-trade agreement covering goods and agricultural produce, but not services. The plan, devised by May’s adviser Oliver Robbins, is a heroic attempt to solve the Irish border problem.

That problem arises from a commitment by both Britain and the Republic of Ireland to keep a “frictionless” border between the Republic of Ireland, which remains in the EU, and Northern Ireland, which, as part of the UK, leaves it. But to maintain an open border in Ireland would mean creating a customs border between two parts of the UK.

Hence the Chequers plan for a continuation of free trade in goods between Britain and the EU. Britain would make sure that goods entering Northern Ireland, but bound for the EU via the Republic of Ireland, paid their EU customs duties and conformed to EU health and safety standards.

The Brexiteers in May’s Conservative Party oppose the Chequers Plan, because it implies too much integration with the EU. And EU leaders don’t like it, either, because Britain cannot be allowed to be in for some purposes and out for others.

The final possibility is another “half in, half out” scenario. Britain would leave the customs union, but remain in the European Economic Area, which includes the 28 members of the EU plus Norway, Liechtenstein, and Iceland. EEA countries, though free to set their own tariffs, follow nearly all of the EU rules and pay contributions to the EU budget. So the EEA option would be even more anathema to hardline Brexiteers than the Chequers Plan.

So what will happen? Most bets are on Britain formally leaving the EU in March 2019, but “temporarily” remaining in the customs union, giving it two or three years to negotiate the final divorce settlement. The Brexiteers will be enraged by such a “soft” exit, but it will probably be enough to ensure parliamentary approval. The referendum decision to leave the EU will be honored, but its harsh economic consequences will be postponed: a triumph of pragmatism over ideology.

If the Brexit trajectory turns out this way, it will be a good illustration of the double character –and function – of politics. John Maynard Keynes put the matter well: “Words ought to be a little wild, for they are the assault of thoughts upon the unthinking,” he wrote in 1933. “But when the seats of power and authority have been attained there should be no more poetic license. On the contrary, we have to count the cost down to the penny which our rhetoric has despised.”

Politicians exist to give voice to resentments bottled up by “unthinking” conservatism. They let loose feelings which we would be better off without, but whose suppression threatens political explosions. It is also their job to ensure that such irruptions do not have extreme consequences. From time to time, the balancing act breaks down, as it did in 1914, when the momentum of events overwhelmed belated attempts at compromise. It happened again in the 1930s, because fascism and communism were irredeemably extremist. But mostly politicians do their double job, which, in the last analysis, is to preserve domestic and international peace.

Thus, the Brexit compromise, if it happens, may be a moderately optimistic foretaste of the fate of populism in our century. The resurgence of economic nationalism which unites Brexit, Trumpism, and the European far right will not lead to the breakdown of trade, hot wars, dictatorship, or rapid de-globalization. Rather, it is a loud warning to the political center – one that may cause even the current crop of extremists to shrink from the consequences of their words.

 

Dr. Fareed: Why I Talk to Bono


September 23, 2018

Dr. Fareed: Why I Talk to Bono

Image result for Bono and Fareed Zakaria

When confronting a challenging problem, it’s sometimes useful to listen to someone who looks at it from an entirely different angle. That’s why I found it fascinating to talk about the rise of populism and nativism with Bono last weekend at a summit in Kiev. The Irish singer-activist-philanthropist sees the same forces that we all do, particularly in Europe, but he zeroes in on something intangible yet essential. The only way to counter the dark, pessimistic vision being peddled by nationalists and extremists, Bono says, is to have an uplifting, positive vision. Homing in on the trouble in his part of the world, he told me, “Europe needs to go from being seen as a bore, a bureaucracy, a technical project, to being what it is: a grand, inspiring idea.”

Image result for bono quotes

To that end, Bono’s band, U2, has been choosing a moment during its concerts to unfurl — wait for it — the flag of the European Union. “Europe is a thought that needs to become a feeling,” Bono wrote in a recent op-ed in the German newspaper Frankfurter Allgemeine. He is trying to give that feeling meaning. To him, Europe is about the ability of countries that were once warring to live in peace, for people of many different lands and languages to come together. “That idea of Europe deserves songs written about it, and big bright blue flags to be waved about,” he wrote.

Image result for Bono and Fareed Zakaria

Bono admits that Europe is a “hard sell” today. The continent is ablaze with populism. These forces have taken control in Hungary, Poland and Italy and are steadily gaining ground elsewhere, including Germany and Sweden. It seems that everywhere the fuel is the same: hostility toward strangers, foreigners, anyone who is different. In April, NPR’s Joanna Kakissis reported on a Hungarian sociologist, Endre Sik, who had polled Hungarians about allowing asylum seekers into the country. He found strong resistance to accepting particular groups such as Romanians, Chinese and Arabs, and then he decided to ask about the “Pirezians.” The Pirezians are a fictional ethnic group of Sik’s own creation, yet Hungarians roundly refused to take them in. Sik told NPR, “The Hungarian form of xenophobia is, let’s say, the classic form: ‘They are different, we don’t know them, therefore we hate them.’ That’s the beast in us.”

Bono’s message resonated because I had been reading Francis Fukuyama’s new book, “Identity: The Demand for Dignity and the Politics of Resentment.” Fukuyama argues that identity stems from humans’ deep-seated psychological need to be recognized as possessing dignity. In recent decades, in the understandable search for recognition, persecuted minority groups (blacks, Hispanics, gays) have celebrated their identity — and so have working-class whites, who now feel ignored and forgotten. The answer, Fukuyama says, is not to reject identity politics but to construct broad identities that can embrace others and unify different groups.

The founders of the E.U., he argues, spent too much time building the technical aspects of the project — laws, rules, tariffs. They neglected to nurture an actual European identity, something people could believe in not for rational reasons but for emotional and idealistic ones. In the American case, he argues, the anti-populist forces have to create a broad identity centered on core American ideas and values rather than narrow ethnic, racial or religious ones. Thus, we need a much greater focus on assimilation, on the celebration of American identity, on the things that make us all love being American. We need to connect with people in their guts, not just in their heads.

The European challenge might seem much greater than the American one, but in fact, distrust of foreigners doesn’t necessarily mean a rejection of Europe. Even in Poland and Hungary, where ethnonationalist sentiments run high, support for the E.U. is quite high. According to the latest European Commission surveys, 71 percent of Poles say they feel attached to the E.U., more so than Germans or Spaniards, while 61 percent of Hungarians feel attached, outstripping the French, Swedes and Belgians. The problem is, it isn’t a deep, emotional bond — they are three to four times more likely to feel very attached to their own nation than to the E.U.

Image result for Fareed Zakaria talks to BONO

What people in Europe and the United States ought to be proud of, what they should celebrate, are the remarkable achievements of diversity. “I love our differences,” wrote Bono, “our dialects, our traditions, our peculiarities. . . . And I believe they still leave room for what [Winston] Churchill called an ‘enlarged patriotism’: plural allegiances, layered identities, to be Irish and European, German and European, not either/or. The word patriotism has been stolen from us by nationalists and extremists who demand uniformity. But real patriots seek unity above homogeneity. Reaffirming that is, to me, the real European project.”

And, I would add, the American project as well.

(c) 2018, Washington Post Writers Group

 

“Global Britain” Is Already on Its Own


March 25, 2018

“Global Britain” Is Already on Its Own

by Mark Malloch-Brown

British voters’ decision to leave the EU may have been motivated mostly by domestic issues such as political dysfunction and immigration, but the costs of departure are being felt first on the foreign-policy front. The international response to the recent nerve-agent attack in Salisbury, England, suggests that the costs will be high.

Image result for “Global Britain” Is Already on Its Own

LONDON – British Prime Minister Theresa May has finally had a good crisis. Responding to the nerve-agent attack on former Russian double agent Sergei Skripal and his daughter Yulia in the placid market town of Salisbury, England, May projected strength – including to her fellow European leaders – by demanding that the Kremlin answer for the crime. As a former home secretary, security is clearly her strong suit, and she has now gone a long way toward repairing her tattered authority in Parliament.

Moreover, May also managed to reach an agreement with European Union negotiators on a 21-month transition period for the United Kingdom’s withdrawal from the bloc. And yet, despite May’s personal successes, this week might well be remembered as the moment when the foreign-policy costs of Brexit became clear.

Image result for “Global Britain” Is Already on Its Own

Until now, the British foreign-policy grandees and former ambassadors warning that Brexit will severely damage the UK’s standing in the world have been dismissed by much of the public as discredited elites and fear-mongers. Understandably, Brexit supporters have taken little notice of various straws in the wind heralding the direction their country will take. They are unmoved, for example, by the fact that, after losing a United Nations vote, their candidate pulled out of the race and the UK now has no judges seated at the International Court of Justice for the first time in 71 years.

Image result for Boris Johnson tough on Putin

The Cranky Boris Johnson with The Russian Foreign Minister Sergei Lavrov

Still, if that wasn’t enough to reveal Britain’s new loneliness, the use of a Soviet-era nerve agent on British soil certainly is. Though EU members have expressed their support for Britain and made assurances that Brexit will not disrupt solidarity or security, there are signs that this united front may, in fact, be just a front. The European Commission President, Jean-Claude Juncker, congratulated Russian President Vladimir Putin on his election to a fourth term – a move that rankled the UK. Greece and others also expressed some skepticism about the relationship with the UK as they arrived in Brussels for the European Council summit.

Image result for Trump congratulates Putin

Across the Atlantic, US President Donald Trump also congratulated Putin. While he also condemned Russia for the Salisbury incident – a rare departure from the Putin-loving corner he has painted himself into – support for Britain on this occasion seems to have been motivated more by his political calculus than a deep sense of solidarity. After several days of deafening silence, Trump was under growing pressure to speak out. And on the whole, his unpredictability and transactional approach to alliances has already called into question Britain’s most important relationship outside Europe.

Beneath the surface, the international response to the Salisbury attack reveals alarming cracks in the UK’s position on the world stage. It is widely assumed that the UK’s weak response to similar incidents, not least the 2006 murder of the Russian defector and former spy Alexander Litvinenko, has convinced Putin that he can get away with such provocations. But Putin may also have anticipated the public outrage over the attack on the Skripals and calculated that EU member states with pro-Russian governments – namely, Hungary, Greece, and, soon, Italy – would veto any strong EU response. By this reasoning, Putin could drive an even larger wedge between Britain and Europe, thus advancing his longstanding goal of undermining European solidarity.

In any case, the UK’s isolation and vulnerability are now abundantly obvious. In its efforts to apply pressure on Europe, the Kremlin has identified Britain as a weak link. And those efforts go well beyond attempted murder on British territory. It seems increasingly likely that Russia also interfered in the Brexit referendum, as it did in the 2016 US election; and that Russian criminal elements have penetrated London’s financial and services sectors.

Britain is a beachhead in Russia’s strategy to undermine European security. Unfortunately, the territorial defense guarantee that comes with NATO membership does little good in a conflict conducted in the shadows through assassinations, cyber warfare, and criminal subterfuge. Nor does NATO membership help in responding to the Kremlin’s exploitation of European dependence on Russian energy, such as when it uses natural-gas supplies as a geopolitical weapon.

The decision by a slim majority of UK voters to leave the EU may have been motivated mostly by domestic issues such as political dysfunction and immigration, but the Skripal episode has made it clear that the costs of departure will be felt first on the foreign-policy front. The rest of Europe will sink or swim together in confronting Russian aggression. But the UK, having singled itself out, is a prime target for a dunking.

In recent years, Russian officials had already become increasingly derisive toward Britain’s presumptions about its international status and power. Like many observers around the world since the Brexit vote, the Kremlin does not look at the UK and see a country able to wield anything approaching global influence. Rather, it sees a country mired in nostalgia – easy pickings for destabilization.

In a sense, “Leave” voters were right that the EU is out of touch with the times, but not for the reasons they thought. One can debate whether the EU is a stale champion of the rules-based liberal international order. But what is now clear is that it is not ready for the emerging post-liberal order.

In the new order, strong states will throw their weight around with little care for the rules-based system that the EU has long epitomized. But at least the EU will have numbers on its side. Putin’s Russia will be just the start of post-Brexit Britain’s worries. The UK will also have to contend with China, Turkey, Egypt, Saudi Arabia, and even its most important ally – the US.

Just as Britain negotiates its exit from the EU, the consensus-based multilateralism of the post-war era is being supplanted by muscular nationalism. In this new schoolyard, only those with committed friends will be able to stand up to the bullies. Others will have no other choice than to cower and hope for the best.

Moving from Defence to Offence on Trade Strategy


March 5, 2018

Moving from Defence to Offence on Trade Strategy

Author: Editorial Board, East Asia Forum

Image result for Trump declares a trade war  Commerce Secretary Wilbur Ross with his Boss,President Donald Trump

 

The trade architecture in East Asia — the most dynamic region in the global economy — is up for grabs. The very system on which regional arrangements are built is under threat.

US President Donald Trump’s withdrawing the United States from the Trans-Pacific Partnership (TPP), his ‘America First’ agenda and his declaration last week of the first shots in a global trade war undermine the WTO and the global rules-based economic system that it underpins. Asia and the global community, including the United States, have relied upon and benefitted from that system for over 70 years.

Can East Asia put aside its differences and define a set of arrangements that protect its own economic security interests absent the United States? US leadership put this system in place and drove its expansion throughout the post-war years. Now the United States is generating the headwinds that threaten to unravel it. Just last week Trump announced the first salvo in what could be a trade war with a 25 per cent tariff on all steel imports and 10 per cent tariff on aluminium imports. The temptation for other countries is to retaliate with their own self-harm policies.

What’s at stake?

Image result for Trump declares a trade war

The multilateral trade regime provides the cement and ballast that makes it easier to manage tricky rivalries and conflictual relationships of the kind that abound in Asia but around which large-scale economic interdependence and prosperity have been built. The ‘America First’ challenge threatens the collapse of that system and a descent into beggar-thy-neighbour protectionism and political conflict reminiscent of the lead-up to World War II.

How leaders in Asia respond to this challenge and the arrangements that the region settles on will matter for three important reasons. It will substantially affect the welfare of individual countries and the communities within them. It will affect the atmosphere for both economic and political cooperation in the region. And, given the size of the Asian economy, it will matter for whether the global rules-based economic system withstands the assault upon it.

No single country  acting on its own can lead a response to the vacuum that United States is daily creating in global governance. This US-sized hole in the Asia Pacific will have to be filled with leadership from the rest of the region as a whole.

Asian and Pacific nations have responded definitively so far. And leadership has come from one of the most unexpected places: Japan, traditionally shy to step out in front.

Once Trump declared that the United States was getting out of the TPP, Japan led the remaining 11 members towards the agreement’s conclusion without the United States. That deal is expected to be signed in Chile this week. The awkwardly named Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), otherwise known as TPP-11, would not have happened were it not for Prime Minister Shinzo Abe’s leadership. Australia’s also played a major role, but Japan (the Partnership’s largest economy absent the United States) was the decisive player.

As Shiro Armstrong explains in this week’s lead essay, ‘conclusion of the CPTPP does not deliver the big strategic goal of keeping the United States entrenched in Asia. Instead, it sends to Mr Trump a strong message of the region’s commitment to openness. Holding the line and pushing back against growing protectionist sentiment keeps the pressure up, with market opening and reform on which US businesses and consumers miss out’.

Most surprised about Japanese leadership are the Japanese themselves. As Armstrong says, Japan ‘has found itself in an unusual position. Japan has often relied on external pressure, usually from the United States, to advance its diplomatic goals and even to push domestic reforms’.

Asia cannot count on Japanese leadership alone, nor can it count on Japan’s continuing in this manner. In saving what’s left of the TPP, Mr Abe saw an opportunity to hedge ‘against the uncertainties that Trump has generated in regional and global trade policy, strengthening ties with other partners like Australia and India and laying the groundwork for improving relations with China’.

Australia almost single-handedly led the push back against Trump’s team  tearing up multilateralism as APEC’s central tenet at the summit in Vietnam last November.

With Australia having held the line in APEC and moved forward on the TPP, what is needed now is for the other powers in Asia to join Australia and Japan in preserving and protecting the global system.

The CPTPP, even if it expands membership to include other middle powers in East Asia, is not systemically important enough to do the job. With the United States in the agreement, the TPP would have accounted for 38 per cent of the global economy but without it the agreement accounts for only 13 per cent.

In East Asia, there is fortunately another vehicle that has the weight to do the job. The Regional Comprehensive Economic Partnership (RCEP), which is currently being negotiated, involves the 10 ASEAN members plus Australia, China, India, Japan, New Zealand and South Korea. That grouping accounts for 31 per cent of global economy.

RCEP (perhaps the second-worst acronym in Asia after the CPTPP) is as important as it is difficult to realise with the required ambition. Including the major economies of Indonesia, India and China makes a tall order out of large and credible commitments to economic opening . The anxiety to get a deal done quickly could compromise the quality of the arrangement and therefore its impact. A hastily concluded RCEP deal that is not credible in its ambition would be a mistake and a huge lost opportunity, risking more harm than good. India is still playing its familiar role of spoiler by dragging the agreement down and other leaders have yet to expend political capital that they need to on RCEP.

There is no clear leader in RCEP. The Partnership is not China-led as is often wrongly claimed: ASEAN is the hub and inspiration, and the major powers, including China, are the spokes. The only leadership that China can show that Australia, Japan, India and others can accept is one where it commits to reforms and opening up its economy. That will benefit both China and the global economy.

RCEP is the best chance at an agreement that is inclusive of China and locks it into reforms. The CPTPP may be easier for countries to join than the original TPP since it has frozen ‘some of the more egregious provisions of TPP — especially the US-pushed intellectual property protections that were likely to benefit big business in the United States at the expense of consumers in the region’, as Armstrong explains. But expanding CPTPP membership to China is unlikely since it would close the door to any possibility that the United States might rejoin at some time in the future.

There is little chance of the United States rejoining the TPP under Mr Trump or even the president after him. Piecing together political leadership on trade in Washington will be difficult without making progress on an agenda for dealing with the issues that have led to the current problems: stagnant middle-class incomes, wider distribution of the gains from trade and a properly functioning social safety net. The US Congress is unlikely to agree to join an existing deal, even though the United States was the driving force of the original TPP. The United States’ joining a deal that China is party to any time soon is inconceivable.

If East Asia does not hold the line on corrosion of the global trade regime and protectionism, no one else is likely to.Crafting regional trade architecture without the constructive participation of the United States is the immediate challenge and will remain the challenge for the foreseeable future. Australia and Japan have led the initial charge, but China, India and Indonesia will need to step up.

Asian powers may not be ready for the sort of leadership that is needed, but the threat to their interests in the global system will not wait until they are.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.