Source: Bureau of Economic Analysis; foreign affiliate sales: estimates for 2018; total trade: data for goods and services 2018

The novel coronavirus COVID-19 is currently wreaking havoc on the world economy. Disrupted supply chains are forcing companies to throttle back production. As China was the epicenter of the crisis, headlines thus far have focused on how German and European companies have had to adjust because they are so reliant on deliveries or component production in China.

These stories seem to have reinforced a fairly widespread—yet false—view that China has become Europe’s top commercial partner. Spending time in Germany this year I have been struck by repeated assertions by German government representatives that this is so. Those making such statements usually point to sizable bilateral trade in goods.

There is no doubt that commercial ties with China have become more significant for Germany and Europe. But that does not mean that China is the country most important to the health of the German or European economies.

Reducing complex commercial ties to one metric—trade in goods—ignores the commercial importance of investment links, services, digital connections, innovation ties, and foreign sources of “on-shored” jobs for the European economies. On each of these other metrics, the ties that bind Germany and Europe to the United States are much thicker and far deeper than those with China.

These additional arteries are literally the lifeblood of the transatlantic economy. If COVID-19 chills these connections, the ripple effects on the German and European economies are likely to be far worse than what we have seen thus far from China. On the other hand, if the United States and its European partners are able to avoid additional commercial tensions and actually sustain their deep commercial bonds during this crisis, the overall impact of a COVID-19-induced recession is likely to be much lower.

Half Right, All Wrong

US exports of goods to the EU totaled $337 billion in 2019, up 6 percent from 2018 and more than three times larger than US goods exports to China ($107 billion in 2019). US imports of goods from the EU were even larger, $515 billion in 2019. 2019 figures for trade with China are not yet available, but in 2018 the EU exported €351.2 billion in goods to the US and €210 billion to China. The EU imported €213.4 billion in goods from the US and €395 billion from China. That means that total EU-China trade in goods of €605 billion was roughly €40 billion more than EU-US trade in goods.

Keying in on this single metric, on March 6 Germany’s statistics office, the Statistisches Bundesamt, issued a bald statement that “China was Germany’s largest trading partner in 2019 for the fourth year running.” I have heard many government and industry representatives parrot the same line. Strangely, the professional number-counters only count trade in goods. They omit trade in services—the fastest growing segment of the global economy. In short, Germany’s official statisticians get it only half right, and therefore all wrong. Apparently, one of the best kept secrets in Berlin is how German and European firms actually operate.

The Trade Flows You Can’t See

In 2017, the last year of available data, the EU exported €236 billion in services to the US and €42.6 billion to China. It imported €223 billion from the US and imported €30.2 billion from China. So, in sum, EU services trade with the US was €469 billion compared with only €72.8 billion with China.

Here’s the reality: the US and Europe are the largest services economies in the world. They are each other’s largest services market, and dense transatlantic services linkages mean that the transatlantic services economy is the geo-economic base for the global competitiveness of US and European services companies. Europe accounted for 38 percent of total US services exports and for 42 percent of total US services imports in 2018.

In short, if you put trade in goods and services together, then it is clear that the largest trading partner for Germany and the EU overall is actually the United States. And it has been thus for decades.

And this is just the beginning of the story. Most German and European companies actually prefer to deliver services via their investment ties rather than through exports. Allianz of America provides insurance, DHL Holdings offers courier services, and SAP Americas delivers software services across the United States. Volkswagen, Daimler, and BMW all supplement their US-based manufacturing operations with a range of customer services. In 2018, sales of services by European companies based in the US amounted to $585 billion, more than double European services exports to the US in the same year. Similarly, sales of services by US companies based in Europe of $882 billion were 2.5 times larger than US services exports to Europe. And all of this dwarf the sales that American and European companies are able to make in China, due in part to the many restrictions the Chinese impose on Western companies.

Why Export When You Can Invest?

These numbers highlight an additional reality: trade itself is a misleading benchmark of international commerce. The real backbone of Germany’s international economic standing is investment, not trade. And here again, America is the preferred destination. The US accounted for 62 percent of Europe’s non-European assets around the world in 2018. The total European stock in the US of $3.0 trillion was four times the level of comparable investment from Asia. Germany’s total FDI stock in the US totaled $324 billion in 2018, and German investment flows to the US grew 54 percent in the first three quarters of 2019. China plays a marginal role in comparison.

Europe’s role vis-à-vis the United States is very similar. Europe accounted for about 60 percent ($18 trillion) of total US global assets in 2018. This is more than four times the amount of comparable US investment in the entire Asia-Pacific region. Moreover, Europe’s share of total US FDI is going up, not down—57.5 percent over the past decade. And when US FDI flows to Caribbean offshore financial centers are subtracted from the total, Europe’s share climbs even higher, to almost two-thirds of US direct investment flows.

An inordinate fixation on trade ignores the reality that most German and European companies prefer to deliver goods and services by investing in other countries in order to be close to their customers, rather than sending items across the ocean. Sales by European companies based in the US in 2018, for instance, were more than triple European exports to the United States. Sales by US companies based in Europe, in turn, were roughly one quarter larger than the comparable US sales throughout the entire Asian region. Ford, GE, Amazon, IBM, Hewlett-Packard, 3M, Caterpillar, Goodyear, Honeywell—American companies have a long-established presence in Germany and other European countries, and their sales reflect that. Sales by US companies in Germany alone were over two-thirds larger than combined US sales in Africa and the Middle East.

So, despite the headlines about US-European trade wars, American and European companies also earn their money on each side of the Atlantic, not in China. In 2019, US affiliate income in Europe rose to a record $295 billion and European affiliate income earned in the United States in 2019 was also at a record $140 billion. Over half of the income US companies earn abroad comes from Europe. That is roughly three times more than what US companies earn in all of Asia.

At Home, Abroad

All of these facts run counter to the fashionable narrative that US and European companies prefer China or other low-cost nations to developed markets. The reality is different, for several reasons.

First, investing in Europe or the United States is relatively easy, while investing in China remains difficult because of onerous restrictions on foreign ownership and forced technology transfer rules. Second, growth prospects in China have slowed not only because of the coronavirus but because Beijing has shifted toward more consumption- and service-led growth and away from export- and investment-driven growth. Third, in addition to being two huge markets, the US and Europe are wealthy, which is correlated with highly skilled labor, rising per capita incomes, innovation, and world class R&D infrastructure, among other things. Together the US and Europe account for half of global consumption, and gaining access to wealthy consumers is among the primary reasons why US and European firms invest in each other’s markets.

Deep and thickening transatlantic investment ties contrast starkly with FDI coming to each continent from China. For some years Chinese FDI in both the US and Europe soared from a relatively low base. However, Chinese investment is now plummeting on both continents due to bilateral commercial tensions and tighter US and European scrutiny of such investments. Chinese investment flows to the US declined to approximately $4.5 billion last year, and Chinese FDI in Europe fell by 40 percent to $13.4 billion. Looking at the paucity of deals in the pipeline even before the coronavirus crisis struck in such dramatic fashion, it appears 2020 will be a year of weak Chinese investment in both North America and Europe.

Finally, the transatlantic economy is also the fulcrum of global digital connectivity. North America and Europe generate approximately 75 percent of digital content for internet users worldwide. Transatlantic flows of data continue to be the fastest and largest in the world, accounting for over one-half of Europe’s data flows and about half of US flows. 55 percent more data flows via transatlantic cables than over transpacific routes. In 2018 US exports of digitally-enabled services to Europe were double US digitally-enabled services exports to the entire Asia-Pacific region. Similarly, EU exports of digitally-enabled services to the United States alone were greater than EU exports of such services to all of Asia and Oceania.

Misleading Focus

An inordinate focus on trade in goods is deeply misleading. The health of the German economy and Europe’s international competitiveness is not just dependent on this one particular segment of commerce, but on the many other ways Germany and its European partners are bound to others around the world. A fuller understanding of these forces makes it clear that, despite much talk of de-globalization and de-coupling and siren calls of “America First” or “Europe First,” the United States and Europe remain deeply intertwined and embedded in each other’s markets, and that their respective links with each other—not China—remain the driver of the global economy. To argue otherwise is to miss the forest for the trees.

COVID-19’s hit to European-Chinese commercial connections was simply the first phase of this cascading crisis. A shutdown of transatlantic commercial ties, which are much deeper and wider, would be far more devastating. Now is not the time to exacerbate transatlantic commercial tensions. On the contrary. Ensuring that transatlantic flows of goods, services, and investment are sustained is one of the most important things that can be done right now to mitigate the economic impact of the pandemic.

N.B. This article is based on the author’s and Joseph P. Quinlan’s publication The Transatlantic Economy 2020, which will be released on March 26, 2020.

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© REUTERS/Andreas Gebert

A small biotech company in the German city of Tübingen is one of about 20 companies, institutes, and universities worldwide working on developing a vaccine against COVID-19, the new coronavirus that is causing a worldwide shutdown.

With a staff of 450, CureVac AG is pushing ahead with an innovative, RNA-based method that, if proven successful in the clinical trials planned for this summer, would make it possible to vaccinate hundreds of millions of people within just a few weeks.

Yet on March 15, the German newspaper Welt am Sonntag reported that US President Donald Trump was trying to buy up the company or hire away its scientists so that the United States—and only the United States—would benefit from the vaccine.

From a journalist’s point of view, it’s a good story. For the German government, however, the story is even better: at a time of terrible worries and fears, the CureVac drama provides a perfect narrative of hope, of good against evil, and of solidarity against selfishness. It’s crisis communication at its finest.

Being such a good story doesn’t make it untrue, either, despite energetic denials by Richard Grenell, Trump’s ambassador to Berlin. The German government confirmed the report; CureVac itself issued a half-hearted statement which only denied that an offer for the company as a whole had been made. No mention was made of trying to lure away the scientists working there.

Add to that a curious coincidence: CureVac had come to Trumps’s attention at a White House meeting on March 2, where a number of biotech CEOs outlined their efforts against the coronavirus. One of them was Daniel Menichella, the German company’s CEO, a Harvard-educated American business manager.

Just days later, Menichella was replaced unexpectedly. The shareholders brought back his predecessor Ingmar Hoerr, a co-founder of CureVac. Hoerr is not in good health, so his deputy Franz-Werner Haas will be running the company day-to-day for the time being.

Trump’s attempt to poach the vaccine research outraged German politicians of all parties. The Federal Ministry for Education and Research pointed to the substantial financial support that CureVac had been receiving for its research. The European Commission chipped in with offers of additional credits of up to €80 million.

“Germany is Not for Sale”

Economic Minister Peter Altmaier even raised the idea that Germany could block a foreign takeover because German security interests were at stake. Except that this time, it would be to protect a German company not from China, but from the United States. “Germany is not for sale,” Altmaier added somewhat unnecessarily. Chancellor Angela Merkel said the federal government had gotten involved at a very early stage. The issue had been “solved,” she said.

At a time when all the news seems dark—from the number of infections to the economic fall-out of the crisis—the CureVac story hits a number of spots.

It caters to rising anti-American feelings fueled by anger over President Trump’s policies and attitude and especially over his decision to abruptly close US borders to Europeans without consulting with allied European governments. It also deflects criticism away from Germany’s public authorities, which have not always been up to scratch over fighting the pandemic, either.

The story contains an element of “David against Goliath”—after all, it’s about a small German company facing down demands from the giant United States. In parallel (and perhaps in contradiction, but who wants to squabble?), it’s a battle between billionaires.

CureVac’s main shareholder is Dietmar Hopp, founder of the German software giant SAP and certainly a much richer man than Trump. Hopp immediately promised to keep the company and its jobs in Germany and to make any vaccine available to people all over world. Incidentally, the second-largest investor is the Melinda and Bill Gates Foundation—and Gates will certainly not accept that any vaccine be limited to the US public.

Yet the most potent ingredients in this remarkable story are pride and hope: the pride about having a German company on the cutting edge of the world’s most important research; and the hope that a vaccine available to everybody in the foreseeable future. While it is clear that the process is still likely to take several more months, CureVac and its commitment to Germany and the world still bring a silver lining to the Corona story.

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© REUTERS/Caitlin Ochs

Frustrated by three years of US President Donald Trump’s chaotic presidency, many European leaders have openly wished for a Democrat to defeat him in this November’s general election. Their opinions of Senator Bernie Sanders, though, might be different. Sanders, who emerged as the main rival to Democratic front-runner Joe Biden after this week’s Super Tuesday results, seems unsettling to many EU foreign policy-makers. One senior diplomat told the Washington Post that Europeans are “all praying for Biden.” Others remarked that they would see a Sanders victory as further evidence of an isolationist turn in the United States. The Economist went so far as to describe a potential Trump-Sanders match-up as “appalling choice with no good outcome.”

Such fears are misguided, however.  Although Sanders may not speak the language of the Cold War American foreign policy consensus, he does not represent as stark of a break with it as his critics fear (and many of his supporters hope for). In many areas—such as climate policy and reducing tensions with China—the Vermont Senator may actually hew closer to European views than Biden does. The “old continent” has little reason to fear, and should even hope for, a Sanders victory.

The US commitment to NATO

One of the main anxieties that European leaders express about a Sanders presidency is his commitment to mutual defense. They often focus on his past opposition to NATO’s expansion in Eastern Europe, which he argued would provoke Russian aggression. They allege that this is proof of ‘isolationism’ and an anti-Western outlook. Leftists like Sanders, however, were hardly alone in this opinion. George Kennan, an arch-realist and the architect of America’s Cold War containment policy, felt the same way. In 1990, he argued that NATO expansion would prove to be a “fateful error” which would “inflame the nationalistic, anti-Western and militaristic tendencies in Russian opinion” and could prompt a resurgence of East-West animosities. This not a niche viewpoint; a group of dozens of senior American diplomats shared this view at the time.

Although he opposed the expansion initially, Sanders has not expressed any desire to renege on the US’ existing commitments. In a recent interview with 60 Minutes, he said he would be willing to use military force to defend American allies and that he “believes in NATO.” Furthermore, even if Sanders wished to limit the US commitment to NATO, he would almost certainly be constrained by Congress, which is strongly supportive of NATO.

In one sense, European NATO members might even find a Sanders presidency a relief. California Congressman Ro Khanna, who often speaks for Sanders on foreign policy, has said that as president, “Sanders is not going to push countries to be increasing their defense spending.” It is unlikely that Joe Biden would exercise similar restraint.

International engagement

Sanders’ long-standing opposition to free trade agreements (FTAs) is also held up as an area of concern for European policymakers. While he is skeptical of the relative lack of labor and environmental standards in current FTAs, Sanders hardly has an autarkic vision for the United States. His policy platform states that “trade is a good thing, but it has to be fair.” He emphasizes stronger protections for workers, the environment, and human rights—all issues the European Commission prizes in negotiations. Far from signaling an end to transatlantic trade, a Sanders-appointed US Trade Representative would likely share more views with his or her EU counterpart than a Biden-appointed USTR would.

Sanders approach to the US’ geopolitical rivals sets him apart from more mainstream Democrats in a way that is uniquely beneficial to Europe. As the EU works to find middle ground between the US and its ‘great power’ rivals, Russia and China, a less confrontational US president may be exactly what it needs. Whereas the Trump Administration insists that the EU reduce ties with China, a future President Sanders is more likely to defuse tensions with America’s rival superpower. This could spare Europeans the painful decision between their security guarantor and one of their largest trading partners. Significantly, Sanders has also been one of the Democratic candidates who said he would re-join the 2015 Iran nuclear deal with no preconditions. This would reduce transatlantic tensions and lessen the chance of conflict with Iran, both of which would be a relief to Europe.

A Rejuvenated Multilateralism

Far from being an “isolationist”, Sanders would seek increased engagement on many issues that are of substantial importance to Europeans. He has the most ambitious climate plan of any candidate, which would allow for critical US-EU cooperation to combat carbon emissions. He also supports strengthening international institutions, which is also a key tenet of European foreign policy.

Where Sanders would continue a rupture with the pre-Trump business as usual—such as limiting the US’ military footprint and curtailing support for FTAs—Europe must realize that the status quo ante was unstable and unlikely to persist. With crumbling infrastructure and declining life expectancy, it is improbable that the US can maintain a global military footprint in its current form for much longer. Because Washington views China as its chief rival, it will likely shift the US’ finite resources away from Europe toward East Asia, regardless of who occupies the White House. Similarly, a country that has experienced hundreds of thousands of lost jobs from free trade agreements should not be expected to support unfettered global markets indefinitely.

Should Europeans still harbor any doubts about whether Sanders may be disinclined to use American resources to solve global problems, they can take solace in the Senator’s own words. When asked to name the best foreign policy decisions that the US has ever made, he listed the United States’ post-WW II Marshall Plan aid to Western Europe and the establishment of the United Nations. As two of the most significant internationalist and pro-European actions the US has ever taken, leaders across the Atlantic can rest assured that a President Sanders would serve their interests well.

The post Op-Ed: Don’t Fear a President Sanders, Europe! appeared first on Berlin Policy Journal - Blog.

© REUTERS/Randall Hill

For the last three years, Europeans have watched US President Donald Trump take a sledgehammer to the pillars of transatlantic relations that lasted for more than seven decades. Somewhat shell-shocked, European policymakers and experts fear a second Trump term would irreparably damage a relationship that has been at the heart of their world. They worry that a parting of ways might be irreversible after eight years of Trump. And they also assume that even if a Democrat becomes the next US president, things will not—cannot—just go back to the “good old days.” A return to the status quo ante, they argue, is impossible.

This is too pessimistic. In many important ways, a Democratic win come November 2020 would see more of a return to the pre-Trump US foreign policy than Europeans currently dare to hope for.

The European fear of abandonment by the United States is understandable. It remains focused on how a second Trump term would play out, rather than examining the alternative of a new Democratic presidency. Notwithstanding the dawning feeling that a Trump win is becoming more likely, a change in the White House is very possible—and Europeans should be paying more attention to the foreign-policy positions of the Democratic field. If they do, they will see that fears about “no going back no matter who is elected” are overdone.

A Positive Picture

The various foreign policy positions of the main contenders for the Democratic nomination (tracked, for instance, by The New York Times and The Washington Post) add up to a quite positive picture for Europe. There is much talk of a party divided between centrists who have a traditional foreign-policy stance—like former US Vice President Joe Biden and Amy Klobuchar—and progressives who would upend the old consensus in their own way—like Bernie Sanders and Elizabeth Warren.

The reality is more nuanced than this image of a black-and-white ideological split, however, as the Brookings Institution’s Thomas Wright has well argued. If they make it to the White House, any of the main Democratic candidates would bring back considerable continuity with the pre-2016 US foreign policy consensus and priorities that are convergent with European ones. (The one case where there is more uncertainty is Michael Bloomberg, who has not put forward positions on as many issues. Yet, to the extent he has, he has often sounded like a traditional centrist, if hawkish Democrat.)

In counterpoint to Trump, all the Democratic contenders place great emphasis on diplomacy, repairing relations with traditional allies, strengthening multilateral institutions, and the need for collaboration in solving international problems such as climate change or the nuclear ambitions of Iran and North Korea. They all acknowledge the existential threat of climate change and have put forward detailed proposals for dealing with it. They would immediately rejoin the Paris Agreement and stress the need for global collaboration, not least with China, for reducing carbon emissions.

Same, Same, But Different

Stressing their commitment to NATO, the leading Democrats would still push European countries to spend and do more on defense, but in a way that is very different to Trump’s. They endorse a traditional US nuclear posture and approach to arms control. They would also re-enter the Iran nuclear agreement.

All of them take a standard hard line toward Russia. They call for strong measures in response to its destabilization of neighboring countries (especially Ukraine, for which more assistance is promised), its corrupt authoritarian domestic model, and its interference abroad. At the same time, they stress the need to continue to engage with Russia over nuclear arms control regime.

In the Middle East, the Democratic contenders have taken critical positions on the war in Yemen and Saudi Arabia’s actions, including calling for an end to military and intelligence assistance in that conflict. With regard to the Israeli-Palestinian conflict, they support the two-states solution and a traditional peace process in which the United States plays a leading role. The Democratic Party is also shifting toward more qualified support for Israel, which may make US policy more congenial to Europeans than under Trump.

A new Democrat presidency would definitely mean more attention to democracy and human rights, backed by aid and in cooperation with traditional partners. This would include a stronger focus on fighting kleptocracy and competing with autocratic powers such as China and Russia. The candidates also take traditional positions on humanitarian intervention and the responsibility to protect, and they say they would be willing to use force in these contexts; for example, in case of genocide or the use of chemical or biological weapons (but not for regime change).

A Critical Dialogue

All of the above is not to say that there would not be differences between Europe and the United States under a Democratic president. There would still be a critical and often difficult dialogue on crucial issues, not least because the two sides do not have identical interests or threat perceptions. This includes trade (where the Democrats have shifted to a more skeptical position), relations with China (where the candidates take varyingly hawkish lines), and reducing the US military footprint in the Middle East.

Europeans should also not confuse a Democratic administration being more aligned with their positions on several issues with it being particularly more interested in Europe. Agreement with Europe would not automatically equate to it reclaiming a greater share of the center stage in US foreign policy. That would still require more heaving lifting by the Europeans on many issues, which is a bipartisan request from Washington. Even a Democratic administration that is fully committed to the transatlantic relationship and multilateralism will make demands of its European allies that they will not always find comfortable.

Regardless of the Trump presidency, the world for which the traditional transatlantic relationship was created—whether the post-Cold War one or even more so the Cold War one—has evolved. So have the United States and Europe, domestically as well as in terms of their geopolitical positions. But what is certain is that those areas of inevitable divergence between them in the coming years will not be handled by any Democratic president in the same, traumatizing way that Europeans have gotten used to under Donald Trump. Calling curtains on the transatlantic relationship no matter who wins in November is certainly premature.

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© Bitteschön TV

In memory of Dr Sylke Tempel (1963-2017), the Board of Trustees of the German-Israeli Future Forum Foundation set up the Sylke Tempel Fellowship Program in 2018.

Under the patronage of Sigmar Gabriel, former Federal Minister of Foreign Affairs and chairman of the Atlantik-Brücke, the foundation awards fellowships to young journalists working on foreign and socio-political issues that will continue to be relevant in Israel and Germany in the future.

The projects are discussed with experts in closed workshops, presented at public conferences and published.

The second year (2020) will focus on the topic “Israel and Germany in the Year of the US Presidential Election: National Narratives, Identities, and Foreign Policy.” Cooperation partners include the American Jewish Committee (AJC), the European Leadership Network (ELNET), the foreign policy magazine Internationale Politik (the German-language sister publication of Berlin Policy Journal; Sylke Tempel was editor-in-chief of both), and Women in International Security (WIIS).

Call for Applications

This call for applications is aimed particularly at young media professionals in Germany and Israel.

Journalists, bloggers, podcasters, and other media creatives who deal with the relations between Germany, Israel, and the United States of America are invited to apply.

The fellows are required to submit an article or other media creation by August 30, 2020, which will be published in a special edition of foreign policy magazine Internationale Politik, in the end of the year. They may independently choose where they want to work. In May 2020, they will be invited to attend expert meetings and a workshop in Israel in order to discuss their projects. In the end of 2020, they will have the opportunity to present their projects at a public conference in Berlin.

Up to twelve fellowships will be awarded with a grant of €3,000. In addition, travel and accommodation costs for the workshop and the two-day conference will be covered.

In order to apply, please provide the following documents:

– Your curriculum vitae

– Sylke Tempel was a passionate reader. In her memory, we are interested to know which literary work you recommend we read, and why.

– A motivation letter

– An outline of the planned project (please refer to the focus topic detailed below on no more than three pages)

Please send us your application documents in German or English by February 29, 2020, by e-mail in one file to: fellowship@dizf.de

If you have any questions regarding the application, please contact Teresa Schaefer: schaefer@dizf.de

Please apply with a project related to the following topical umbrella:

“National Narratives, Identities, and Foreign Policy”

How do the United States’, Israel’s, and Germany’s national narratives, their self-told historical stories and perception of self, impact their foreign policy and relations to one another? How and why do supposedly fixed identities change over time? Are they reflected in election campaigns? If so, how are they expressed specifically in Israel, Germany, and the US? How do national narratives and perceptions of each other shape bilateral and trilateral relations?

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© REUTERS/Carlo Allegri

After more than a year of discussing and promoting it with foreign counterparts and his own ambassadors, German Foreign Minister Heiko Maas “launched” the Alliance for Multilateralism with his French counterpart Jean-Yves Le Drian and others on the sidelines of the 2019 United Nations General Assembly in New York.

But the fledgling formation already faces one of its first tests this month. One of its core members, Canada, is holding elections—and depending on the outcome, the new government could find it hard to fully commit to the Alliance for Multilateralism. Even if Canadian Prime Minister Justin Trudeau, whose government supports the alliance, wins re-election on October 21, his global influence will likely be reduced. Multiple scandals have tarnished both his domestic brand and global celebrity.

Meanwhile his main opponent, the Conservative’s leader Andrew Scheer, comes from a party with a history of skepticism toward the UN and EU—the very institutions that the Alliance for Multilateralism’s French and German leaders view as integral to their own foreign policy interests.

France and Germany have never explicitly confirmed that the alliance is a direct response to the nationalism that culminated in the United Kingdom’s vote to leave the EU or Donald Trump’s election as US President, but its intent is implicit. This has prompted partners with historically close ties to the United States, such as Australia, to wonder where Trump’s America fits into the alliance’s goals and initiatives. Although Canada and the US boast one of the closest bilateral trade relationships in the world, the Trudeau government has not hesitated to support the alliance as one of its core members.

In fact, during Trudeau’s premiership, the world’s tenth largest economy has generally gone the opposite way of its increasingly isolationist Anglo-Saxon partners. Trudeau’s Liberal Party has emphasized completing the CETA free trade agreement with the EU, increased the country’s intake of refugees from Syria, and pledged a major climate package ahead of signing the Paris Agreement. Whether it’s talk of a liberal alliance with Emmanuel Macron, a joint appearance at Montreal Pride with Ireland’s Leo Varadkar, or an unexpected friendship with Germany’s Christian Democrat Chancellor Angela Merkel, Trudeau has been a close partner to many European leaders. They, in turn, have been keen to pose with Canada’s young prime minister in hopes of benefiting from Trudeau’s global star power.

Trudeau’s Sinking Popularity

However, even if Trudeau wins re-election, that star has arguably burned out, making his celebrity less useful to the alliance than it might have been previously. So far this year, he has admitted to wearing blackface makeup on multiple occasions. Parliament’s ethics commissioner rebuked him for improperly pressuring Canada’s attorney general to drop a criminal investigation into a company based in the electorally important province of Quebec. Recent polls have Trudeau’s Liberals and the Conservatives neck-and-neck in the popular vote, yet Canada’s majoritarian electoral system is likely to give the Liberals an edge in parliamentary seats. That said, electoral scenarios in which the Liberals either lose their parliamentary majority or lose power altogether are entirely possible.

Echoing many of their European counterparts, the Trudeau Liberals are of an instinctively multilateral foreign policy culture, though they are still prepared to deploy military assets. For example, Liberal then-Prime Minister Jean Chrétien committed Canada to NATO’s Kosovo and Afghanistan campaigns, even as it opposed the 2003 War in Iraq.

Should Trudeau lose his majority, he may end up having to cooperate with the more force-wary New Democratic Party (NDP). Historically, the NDP withdrew support for NATO’s Kosovo campaign and was, in 2007, the first party to call for Canada to withdraw from Afghanistan. Like Germany, Canada spends around 1.2 to 1.3 percent of GDP on defense (i.e. far less than the agreed NATO aim of 2 percent), and the NDP will be particularly reluctant to support the already hesitant Liberals on any further increases or troop commitments.

So if Trudeau returns to the G7 table, he is likely to do so with less political capital. He may also have difficulties getting smaller parties to support some of his foreign policy initiatives. Yet Canada would likely remain at the core of the Alliance of Multilateralism.

Multilateral Skeptic

Should Scheer become Canada’s next prime minister, he might well pivot away from Macron and Merkel toward Trump and Britain’s Boris Johnson. Skeptical of the EU, Scheer once claimed he was pro-Brexit “before it was cool,” penning an op-ed to urge a Leave vote. The Conservative policy platform pledges to follow Trump’s lead and move the Canadian Embassy in Israel to Jerusalem. Sending a similar signal, Scheer used his first major foreign policy speech to lambast Trudeau’s Liberals for repealing Canadian sanctions against Iran—which were part of the 2015 nuclear agreement with Iran which was deemed a success by everyone but the Trump administration.

While Canada’s European partners—including Germany—have spent the last three years standing by the deal, Scheer pointed to Trudeau’s Iran policy as evidence that Canada is drifting away from its closest ally—the US. Scheer has also pledged to pull Canada out of the UN’s global pact on migration at the same time as fellow conservative Angela Merkel continues to argue forcefully in favor of it. On climate, Scheer and his fellow Conservatives originally voted against ratifying the Paris Agreement before later pledging to reaffirm support for the treaty’s targets.

Scheer’s foreign policy arguments reflect a tradition among Canadian Conservatives of prioritizing the Canada-US relationship and being skeptical toward the UN in general. Former Prime Minister Stephen Harper advocated for Canada to join the US in Iraq when he was opposition leader and deliberately skipped the opening of the UN General Assembly more than once as Prime Minister, despite being in New York at the same time.

Both Trudeau and Scheer intend to continue campaigning for a Canadian non-permanent Security Council seat in 2021—Canada will have to beat out either Norway or Ireland to get one. As Germany and France decide which two countries to support, they will be asking questions about what sort of partnership to expect from a Conservative Canadian government. Would it remain committed to the Alliance of Multilateralism as a core member? Would it back other priorities in the areas of trade, climate, or security? Canada may be not as geopolitically influential as its larger Anglo-Saxon partners, but with Trump and Johnson already sitting at the G7 table, the answer is more important than one might think.

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© REUTERS/Jonathan Ernst

There must be times when Angela Merkel closes her eyes and wishes that Donald Trump would simply go away. In her brief daydream, she would be dealing with a very different politician in the White House: a rational and enlightened person, amenable to debate and argument, and open to a wider view of the world and its history.

But every single time the German chancellor opens her eyes, Trump is still there, busily upending traditional US policy and trying to forge a world according to his own views and interests. All too often, this entails conflict with Germany: over trade, over Iran, over gas from Russia, and—most persistently—over military spending.

A long succession of US presidents has believed that Germany is spending too little on its military (a position somewhat validated by the Bundeswehr’s huge problems with outdated and frequently malfunctioning equipment). But none of them have ratcheted up the pressure like Donald Trump, who seizes every occasion to scold Germany for free-riding.

Where Trump goes, his handpicked diplomats pave the way. In early July, two months before Trump is scheduled to visit Europe twice (both without a stop in Germany, and there’s supposed to be a lesson there), his ambassadors to Poland and Germany raised the issue again. In Warsaw, Georgette Mosbacher tweeted: “Poland meets its 2 percent of GDP obligation toward NATO. Germany does not. We would welcome American troops in Germany to come to Poland.”

Richard Grenell, Trump’s appointee to Berlin and one of the most heartily disliked diplomats ever, happily retweeted Mosbacher’s statement and followed it up with a statement of his own. “It is offensive to assume that the US taxpayers will continue to pay for more than 50,000 Americans in Germany, but the Germans get to spend their surplus on domestic programs,” he said in an interview.

Currently, Washington has 35,000 soldiers stationed in Germany, supported by 17,000 American and 12,000 German civilians—far fewer than during the Cold War, but still the second-largest force outside the United States.

Raising the Pressure

Grenell’s comment allows for several interpretations, all of which aim at raising the pressure on Berlin: the US could bring home some or all of its forces; it could station them in Poland; or it could make Germany pay a much higher contribution in order to keep them.

All three scenarios have been talked about before. In June 2018, The Washington Post reported that the Pentagon was looking at options for bringing back troops from Germany or relocating some of them to Eastern Europe. Warsaw, both because its government is ideologically close to Trump and because it would like US troops on its soil as an insurance against Russian aggression, offered to contribute $2 billion toward the costs of setting up permanent bases.

In March of this year, Bloomberg reported that the administration was drawing up demands for Germany, Japan, and South Korea to pay much more toward the upkeep of US troops. The plan was to make those countries pay the entire cost plus an additional 50 percent for the privilege of hosting them, Bloomberg said, citing anonymous sources in the administration.

According to this report, Trump has been championing the idea for months. In talks with South Korea over the status of the 28,000 troops stationed there, he overruled his negotiators with a note to National Security Adviser John Bolton saying, “We want cost plus 50.” In the end, the American delegation accepted a much lower increase to the South Korean contribution, but the new agreement was concluded for only a year, which means that further talks must be held before the end of 2019.

Bad News for Germany

“Cost plus 50,” if confirmed, is particularly bad news for Germany. According to a study by Rick Berger, a research fellow at the American Enterprise Institute, Germany could be asked to pay 10 times more than today—$10 billion instead of $1 billion per year—if the US decides to include all its costs, even the troops’ salaries.

To irk Germany further, Washington apparently is pondering two rates, with a rebate given to countries that are ideologically aligned with the Trump administration. Germany would certainly not qualify, given the many policy disagreements and the personal dislike between Trump and Merkel.

Most recently, Merkel’s government rebuffed a request from Washington to join a US-led military operation to secure shipping through the Strait of Hormuz. Germany fears being drawn into war against Iran by a US administration that unilaterally withdrew from the Iran nuclear agreement and is ratcheting up the pressure on Tehran.

Costly for All

In his remarks about the troops, Grenell did not refer to the differences over Iran, but they certainly contributed to the Trump administration’s profound exasperation with Berlin. But is it really imaginable that the US would withdraw its armed forces from Germany?

Such a step would be harmful to Germany, and not just because the US bases are an important economic factor. Europe is not ready to defend itself—talks about a European army aren’t getting anywhere in a hurry—and US troops in Germany provide a tangible guarantee of American assistance in case of need.

At the same time, pulling out of Germany would be extremely costly for the US, both financially and in terms of power projection. Most of the troops aren’t in Germany to defend Germany anyway, but because it is an established hub for operations further afield.

Ramstein Air Base is vital for US air operations throughout the Middle East, Stuttgart hosts the US Africa Command, and the Landstuhl Regional Medical is the largest overseas military hospital in the world, providing emergency care to US soldiers wounded in Iraq, Afghanistan, and other trouble spots. Even with huge investment, Poland could not build up such an infrastructure anytime soon.

Officials in the State Department and the Pentagon are deeply worried about any schemes to withdraw the troops or make Germany pay much more for them—which, given the strong current of anti-Americanism in Germany, would be politically impossible.

Keeping Promises

Yet if there is one thing that the world has learnt about Donald Trump, it is that he is good at keeping his promises—whatever the cost. And Trump has been arguing for a very long time that America’s allies should either pay for the troops or see them brought home.

“The Japanese have their great scientists making cars and VCRs, and we have our great scientists making missiles so we can defend Japan,” he said in an interview with Playboy in 1990. “Why aren’t we being reimbursed for our costs?”

Closing her eyes may give Merkel a temporary reprieve from the headache that is promising to happen. But if Trump gets reelected to a second term next year, this one is guaranteed to come back.

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© REUTERS/Lucy Nicholson

US President Donald Trump has announced that the United States will withdraw from the Paris climate agreement in 2020. It would thus become the only country worldwide that is not party to the agreement. This is a setback for a deal that is crucial to protecting the world’s climate and has raised questions about how the remaining signatories can best meet the climate challenge.

There is no lack of goals. In the 2015 Paris climate agreement, we committed to effectively take on climate change and limit its impact. Yet the reality still tells a different story. Even before the supposed US exit likely takes effect, global carbon emissions have continued to rise. Post-Paris is pre-Paris.

At the Tenth Petersberg Climate Dialogue in May, Chancellor Angela Merkel expressed the German government’s goal of attaining carbon neutrality by 2050. In the European parliamentary election a few weeks later, the search for an effective environmental policy also appears to have played a major role, strengthening Green parties. So if it is correct to say—and it is!—that big goals can only be achieved through alliances and allies, then where can we find the allies that we need to achieve these ambitious global goals? And can we do without the US in pursuing a global policy of sustainability?

A Complete Overhaul

The public is growing impatient, not least in Germany. The chairperson of the Christian Democratic Union party, Annegret Kramp-Karrenbauer, recently even compared the debate on climate policy with the refugee crisis of 2015. “If you look at the European parliamentary election results in the East and West, among the Greens and the Alternative for Germany party (AfD), then you can see that we are well on our way to having the climate become a new wedge issue in our society,” she said.

A complete overhaul is the order of the day, with sustainability as the goal. At the same time, there is no doubt the process should be democratic and inclusive. Freedom and prosperity should be maintained and expanded. Climate protection should go hand in hand with growth, a vibrant industrial landscape, social equity, and with overcoming social divisions. Measures with global impact have to be implemented at the local level. Industrial nations can serve as models in this effort. But models can fail: They can come to an abrupt and expensive end if they are not feasible in reality.

The Greatest Talents

The truth is: Germany needs allies to help it make global climate protection a reality. And when you go through the list of potential coalition partners, it is impossible to skip over the US.

The United States remains indispensable. The innovation wave, triggered by companies like Apple, Facebook, and Google, originated on the California Coast. The American West Coast is the driver of innovation and lifestyle. The situation is no different, and will not change, on the path to sustainability: for example, four of the world’s largest automakers, including German powerhouses BMW and Volkswagen, have struck a deal with the state of California to follow nationwide its vehicle emission standards, which are more stringent than federal US requirements.

Only societies without any limits on ideas can have a global impact. The greatest talents still want to go work in the American e-mobility, green finance, artificial intelligence sectors. Where would one look for ideas that could address these issues in the future, if not in the US cosmos of business and industry, politics, society, science, art, and liberal democratic ways of life?

One (almost) cannot get enough of American enthusiasm and optimism. Crucial momentum for a sustainable world will therefore come from the liberal, democratic, creative, and innovative societies. In contrast, the opportunities offered by state capitalist systems are consistently overrated. Dictatorships, even “Green” ones, and autocratic systems ultimately fail because of their economic straitjackets. China may, at first sight, seem to have united economic prosperity and political authoritarianism, but it remains open as to where the path will lead in the current competition between economic and governmental systems.

A Shared Agenda

The sustainability agenda is largely a German-American agenda in its practical implementation. There is, however, a risk that we will be too late and miss out on opportunities. We must also be inclusive in the search for solutions, which won’t be found in opposition to the business community, the public, or the US.

The same goes, in particular, for the next stage of digital and socially inclusive globalization. Although the US administration is constantly rebuking China, India, and others for their unfair advantages, there are indications that Washington would like to avoid further isolation in the areas of environment and sustainability. Research and business opportunities, voter expectations, and the upcoming elections might even change the policy of this US administration, and subsequent administrations might take a more proactive approach to climate protection.

For all those reasons it is worthwhile working tenaciously to keep the US closely engaged in all international fora, such as the G7 and the G20, on a policy level and for practical cooperation in research and development, market-driven innovation (EE, e-mobility), standards, CO₂ incentives, and taxation. Some of Germany’s and the US’s closest partners, such as Canada, are enhancing cooperation with US federal states to complement the partnership at the national level.

The EU and the transatlantic relationship remain our foundation, also for our future agenda: It is in the interest of an export- and security-dependent medium-sized power such as Germany to undertake all efforts to find common solutions. The same motto that applies to the transatlantic relationship as a whole also goes for the sustainability agenda: “united we stand, divided we fall.”

N.B. The author is writing in a personal capacity.

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© REUTERS/Carlos Barria

The European Union usually plays only a subordinate role in the American debates on Europe. But recently, interest in the European Parliament elections has picked up markedly—focused mainly on the current upswing, real or imagined, of conservative or far right populist parties. And there is certainly someone who would welcome a strong result for these nationalist forces: US President Donald Trump.

After a troubled decade most US observers see the EU as a weakened organization. This perceived weakness hasn’t softened Trump’s ire, however. While frequently criticizing those governments that support further European integration, Trump lavishes attention on the nationalist governments in Warsaw and Budapest. Following Trump’s speech in Poland in 2017, Secretary of State Mike Pompeo visited Budapest and Warsaw this February; a Berlin visit, planned for earlier this months, was canceled on short notice. And last week, Hungarian Prime Minister Viktor Orbán was a guest at the White House, allowing Trump to clearly indicate which political forces he is routing for in the European elections.

Prior to the Trump-Orbán meeting, both Republican and Democrat senators had called on the US president to address the Orbán government’s increasingly repressive actions against civil society and independent media organizations in Hungary. Instead, Trump praised Orbán (“respected all over Europe”) for his stance on immigration and that he had been “great with respect to Christian communities.” In other words, the president sided clearly with Europe’s nationalist, euroskeptic, and anti-liberal forces. For Orbán, whose Fidesz party has been suspended from the center-right EPP parliamentary group and whose government is in dispute with the EU, Trump’s support could not have come at a more favorable time.

Good and Bad Allies

Trump’s EU-critical stance has been reinforced by his National Security Advisor John Bolton, who openly opposes the supranational EU and sees in it an anti-American organization that deprives its member states of their national sovereignty. Like Trump, Bolton supports Brexit and has promised the United Kingdom special trade relations with the US after it leaves the EU. In addition, the Trump administration—similar to some members of the government of George W. Bush—seems to distinguish between EU members that are considered good and those that are considered bad partners for the US. The present aversion against the EU was also at play in the small, but symbolic step taken by the State Department at the end of 2018 to downgrade the diplomatic status of the EU delegation in Washington, DC. (It reversed the decision after protests.)

Meanwhile, similar to politics, the US news media, conservative and liberal, is particularly interested in the surge of the right-wing populists and nationalists in Europe. Fox News, whose commentators often share Trump’s EU-critical stance, argued that the election could become a tipping point in post-war European politics. Others zoomed in on the strong poll ratings for the Brexit Party in the UK and Nigel Farage’s announcement that his fight against the “globalist project that seeks to replace national democracies with unelected bureaucracies” would be continued after the election.

Breitbart News, the website once run by the one-time White House chief strategist Steve Bannon, also mostly focused on the UK campaign, reporting on Tony Blair’s “desperate” calls on the British not to vote for the Brexit Party. It also pointed to strong poll results for the French Rassemblement National and on Marine Le Pen’s call on Macron to step down if his party La République en Marche won’t come top in France in the European elections.

The Washington Post focused on the strength of Farage, Le Pen, and Italian deputy prime minister Matteo Salvini, but also reported on the difficulties the latter had to bring together all right-wing populist parties. The populist parties can only agree on a few topics beyond advocating for strong national borders, rejecting immigration, and combating Islamic terrorism, The Atlantic concludes.

A Trump-like Triumph?

The great interest among US observers in the right-wing populist movements can be partly explained by the fact that many see parallels to the developments in the US, and some wonder whether nationalist politics will continue to gain ground. Polls across Europe showed that “the forces that fueled President Trump’s rise are gaining, not losing, strength,” argued the conservative Washington Post columnist Henry Olsen. Since Trumpism would outlast Trump, the mainstream parties would need to adapt and offer real, effective responses to drive down populist discontent, Olsen wrote.

With Bannon eager to pave the way for a global revolution, US observers have also shown much interest in his efforts to bring together the right-wing populist parties in Europe. However, Bannon has been largely unsuccessful so far, as far-right leaders like Le Pen have rejected his advice, pointing to Bannon’s lack of understanding Europe, The New Yorker reported.

This may make gratifying reading for Bannon’s critics. But the queasy feeling that European right-wing populists could achieve a surprise success next Sunday remains—just like Donald Trump did it in 2016.

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© REUTERS / Kevin Lamarque

It has become a weekly ritual. In the midst of desperate attempts by American diplomats to assuage the concerns of counterparts in Europe, President Donald Trump unleashes a volley of tweets that further destabilize a transatlantic alliance that has been crucial in sustaining the global dominance of the United States. In the past few weeks the pace of Trump’s malevolent bumbling has accelerated, with the bullying of European allies at the NATO summit in Brussels and his courting of Vladimir Putin at their summit in Helsinki leading many European policymakers to question the future of an alliance that has endured for over seventy years.

For many observers, the disruptive impact Trump has had on a global order that entrenched the preeminence of the United States seemed to mark a sudden break from established American foreign policy traditions. Disoriented policymakers in the United States often interpret this system shock in near revolutionary terms. The willingness of Donald Trump to undermine America’s alliances is often depicted as a sudden moment where a relatively stable liberal order was overturned by a small faction of Trump loyalists that reject the global role American institutions have played since 1945. Indeed, the idea that the current turmoil engulfing the transatlantic alliance is the product of a unique electoral aberration is comforting to those who hope for its swift restoration after Trump falls.

Yet a closer look at the evolution of relations between the United States and members of the EU since 1992 indicates that there are long term structural factors at play that have been causing tensions within the transatlantic alliance for quite some time. Many of the resentments that Donald Trump’s wildly provocative rhetoric plays upon reflect frustration over supposed free-riding on American generosity. This issue has repeatedly flashed up under previous presidents. In the 1990s, the inability of European states to head off the Yugoslav wars of secession caused frustration among US policymakers who had hoped that the collapse of the Soviet Union could lead to a shift of strategic focus to the Asia/Pacific theater. The invasion of Iraq in 2003 led to deep tensions with key EU states, though British, Spanish, and Polish support for the US war effort balanced rhetoric from those US conservatives, such as John Bolton, who were already beginning to define the EU as a potential strategic adversary.

For many Europeans, the subsequent election victory of Barack Obama in 2008 fueled hopes that the transatlantic alliance could overcome such challenges. But despite initial emphasis on renewed cooperation, the inability of European states involved in the NATO intervention in Libya in 2011 to sustain targeted airstrikes without American assistance brought to the surface frustration with what many US officials believed was a lack of equitable burden-sharing when it came to defense spending. In his final years as president, Barack Obama expressed frustration with a perceived imbalance between high levels of US defense spending and budget cuts in EU member states that were increasingly hampering the operational effectiveness of European militaries.

An Emerging Europe

A paradox of these growing tensions between the US and its European allies is that they were also a product of the EU’s increasingly powerful global role in other key policy areas. While the end of the Cold War led to cuts in European defense budgets that exacerbated the military imbalance with the United States, it also intensified a process of European integration that would lead to an vast concentration of collective trade and regulatory power in a restructured EU. When the Treaty of Maastricht in 1992 consolidated economic and monetary integration and deepened political union, the ability of the EU’s institutions to influence trade and regulation on a global scale expanded rapidly in ways that clashed with the interests of key American business sectors.

Though there are still many unresolved aspects of economic and monetary integration despite the waning of the Eurozone crisis, it is notable that Europeans have repeatedly resisted American pressure over the past decade—for example, Europe has brushed off American calls to change course over such issues as debt relief for Greece or Brexit. The divergence of European strategic priorities from American attempts to shape the global economy has been a source of tension since at least a decade before Trump’s election. As the EU intensifies integration and puts pressure on trading partners to adopt its own regulatory framework, that tension will only grow.

In the context of a transnational system that is increasingly developing its own state-like structures, the EU’s internal institutional dynamic was also creating pressures for greater defense coordination before Donald Trump took power. The dawning realization of the extent of military weakness in the period between the Libyan War and the Russian annexation of Ukraine fueled concerns within Europe about the extent of its reliance on US security guarantees.

The increasingly unpredictable behavior of the US has accelerated these efforts, as even many Europeans who are strongly committed to the transatlantic alliance have swung to the view that American unreliability may well make the effort needed for the EU to achieve strategic autonomy a matter of existential necessity. In what can be described as a belated victory for the Gaullist view of geopolitics, there is now an emerging consensus across the EU that its interests can no longer be made reliant on an American political system that is vulnerable to violent electoral swings between belligerence and paralysis. As ever with shifts in EU policy, this is still likely to be an incremental process. But the emergence of an EU able to project collective power in all areas of policy would diminish US leverage and influence in Europe and geopolitical flashpoints surrounding it.

So rather than just assuming that Donald Trump is the primary factor behind the crisis threatening the transatlantic alliance, it is worth looking at how he has been able to use this long term divergence in institutional approaches and strategic interests between the US and the EU to his advantage. Even in an alternative scenario in which Trump had lost in 2016, a more benign US president would have still have faced tensions between the EU and the United States. These would have needed to be managed in a way that acknowledged the divergence of interests while still retaining the benefits of continued cooperation in security and defense. If Trump leaves office soon, it could still be possible to have such an honest dialogue. Both sides could discuss the implications of a strategic rebalancing process in which the EU expands its military strength to lighten the load on an overstretched United States while American political elites accept the strategic implications of a truly equal partnership.

Yet if Donald Trump continues to sabotage any attempts to explore such a managed rebalancing, the accelerating strategic divergence could quickly become unbridgeable. The differences in opinion between Europe and America would then fuel strategic rivalry. If one takes the potential global implications of such a breakdown in the alliance between the US and the EU into account, then those American policymakers should be careful what they wish for in demanding a massive expansion of European military power.

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