© REUTERS/Kevin Lamarque

It’s November 4, 2020. Across the United States—and across the globe—liberals and Trump-opposing conservatives alike drag themselves from fitful sleep, red-eyed and exhausted, filled with dread, incomprehension, and déjà vu. How did he do it again?

The night before, Donald Trump won reelection as president—despite a chaotic and frustrating first term, multiple investigations, and a historically low approval rating. Of course, Trump had won in 2016 despite many of the same weaknesses, but that win was thought to be a fluke, a product of a weak Democratic candidate, Russian interference, and Trump’s novelty. His critics never imagined lightning could strike a second time.

With a second term, Trump has the potential to be among the most influential presidents in American history. The reelection gives him a mandate to continue his goal of dismantling historic U.S. alliances and trade deals. It means Congress will likely finally acquiesce to building the border wall that the president continues to demand. Trump has already started roundups of millions of illegal immigrants and cut the number of refugees the nation accepts to barely anything, and he’s now expected to forge ahead with plans to curtail legal immigration as well. Having appointed three justices to the Supreme Court in his first term, Trump will likely notch at least another or two in his second term, solidifying the first truly conservative court in almost a century for decades to come. The federal government will be radically reoriented around his form of laissez-faire conservatism. Stung by the Mueller investigation and impeachment attempt of his first term, Trump is also poised to purge the Justice Department and give the president broad protection from scrutiny and investigation.

In the press and the academy, Trump is almost uniformly recognized as a catastrophe, the worst president in history. And even though the public holds little regard for either institution, a majority of voters agree with them, and voted for Trump’s Democratic opponent by a margin of several million. It’s no matter: through a mixture of shrewd strategy and massive spending—both radical departures from the 2016 campaign—Trump has managed to wring out a sizable margin in the electoral college. It’s not an unalloyed victory: once again, Trump failed to win the popular vote, though he continues to insist otherwise. He is now considering new maneuvers to curtail the press, which keeps peskily pointing out his lies and hyperbole. For now, the president is willing to take a moment to enjoy his triumph. They said it couldn’t be done, and he did it—twice.

It Really Could Happen

Is this a euphoric daydream of Trump fans? The dystopian nightmare of pessimistic progressives? Or simply a plausible prediction about 2020?

Perhaps it is all three. Despite the struggles of the Trump presidency, which are acknowledged at home, abroad, and even dramatically inside the administration, as an astonishing anonymous New York Times op-ed in September 2018 demonstrated, the president stands a decent chance at reelection in two years’ time. There are other possible scenarios, as we’ll discuss later, but the prospect of a Trump reelection is both so widely disregarded among his many critics and also so plausible that it deserves serious priority consideration. With the midterm elections over, Trump is expected to ramp up the pace of his campaigning, even though the presidential election is two years away.

The fact is Trump enjoys campaigning far more than he enjoys governing. He never stopped talking about the 2016 race, filed for reelection the day he entered office, and has held campaign-style rallies throughout his presidency. His aspiring rivals will be on the trail soon, too. For years, American political analysts have talked about the “permanent campaign,” which refers to the importation of election-style tactics into governance. Trump has literally created such a permanent campaign, keeping the election-style tactics while largely ignoring the work of governance, save for a few top priorities.

In his bid for a second term, Trump will benefit from systemic features of US politics as well as a few attributes particular to himself. Let’s start with the system. First, incumbency is a powerful force. Since the Second World War, only two elected presidents who sought a second term have failed to win it. One, Jimmy Carter, was hobbled by a poor economy. The second, George H.W. Bush, was also hurt by the economy and by the fact that Republicans had run the country for 12 years, enough for voters to be ready for a change. Even presidents whom voters have harshly punished during midterm elections by pounding their allies in Congress have won reelection (Ronald Reagan, Bill Clinton, Barack Obama). So have those overseeing failing wars (Richard Nixon, George W. Bush).

The incumbency advantage is particularly strong if the economy is good. With remarkable consistency, a president overseeing a growing economy wins at the polls, even if—as is usually the case—he had little to do with creating it. As of writing, the American economy is chugging forward. Employment and stocks are both up, and while wage growth remains frustratingly slow, it is positive. A lot could change between now and November 2020, and some economists believe the US is due for a recession, but as long as current trends hold, Trump has the wind at his back.

White vs. Non-White Voters

Trump also benefits from the peculiarities of the American electoral system. For years before his election, progressive demographers have pushed the “Emerging Democratic Majority” theory. It  holds that as white voters shrink as a portion of the population, the new makeup of the electorate, with greater shares of black, Hispanic, and Asian voters, as well as younger voters of all races, will slant heavily toward liberal candidates. Barack Obama’s two victories, carried by surging votes from African Americans, convinced the theory’s proponents they were right. A high-profile Republican Party “autopsy” of Mitt Romney’s loss in 2012 concurred, arguing that the party needed to open up to non-white voters or risk irrelevance. In the meantime, Democrats benefited from their legacy of strong support in the Rust Belt. There, the shrinking but still large number of blue-collar workers would provide Democratic candidates with a built-in electoral-college advantage. This “firewall” could protect the party until the minority youth movement arrived.

Then Trump came along and demolished both of these basic premises for electoral forecasting. The 2016 race proved that a candidate could still win by relying on white votes—in fact, he could win enough white votes to be elected while explicitly stoking racial grievances. Meanwhile, the return of minority votes to pre-Obama norms suggested that only a rare Democratic candidate can produce the high turnout required to win. At the same time, Trump demolished the Rust Belt firewall, winning Ohio, Wisconsin, Michigan, and Pennsylvania, and coming close in Minnesota.

On the remade electoral map, it is Republicans who have the built-in edge. If Trump can hold most of the states he won in 2016, he’s well on his way to victory. Meanwhile, the list of Republican states that Democrats can hope to flip is short. Liberals are hopeful about someday taking over Texas, as well as minority-heavy Southern states like Georgia, but that’s likely an election cycle or two away. The minority surge is coming, but it’s still on the horizon. In the medium to long term, relying on white votes and racially divisive rhetoric may well be suicidal for the Republican Party, but Trump will be long gone by the time it’s too late.

Trump’s Palace Media

Finally, Trump benefits from his media environment. First, he has the unstinting support of what effectively are palace media. Partisanship in the press is nothing new, but for decades, the United States had nothing resembling the party-aligned organs that exist in many other democracies. Instead, there was a center-left mainstream press that mostly aimed for objectivity, and a small, scrappy conservative media alternative. The right-wing press has grown in strength for the last three decades, but in the Trump era, it has reached its apotheosis, becoming a servant not so much of conservatism as of Trump himself.

The most prominent example is of course Fox News, where star anchor Sean Hannity reportedly speaks to the president daily, but there are dozens of other important outlets of all sizes. The network’s former head, ousted for covering up sexual harassment, is now Trump’s communications director. These conservative media outlets wield enormous influence over their audiences. John Dean, the Richard Nixon aide-turned-informant, has said his boss would have survived Watergate if Fox News had existed to spin alternative narratives.

At the same time, trust in the media as a whole is low—in part thanks to unrelenting attacks in the conservative press—though it has rebounded somewhat since the beginning of Trump’s term. A certain segment of the population will dismiss anything that CNN or The Washington Post reports simply because CNN or The Washington Post reported it, which has lessened the impact of the impressive investigative journalism focussd on the Trump administration.

None of this is to discount the specific characteristics of the 2020 race. Trump’s flaws have been so extensively rehearsed that it’s easy to lose sight of his strengths as a politician. One reason why so many observers didn’t take Trump seriously in 2016 was that for years, businessmen had announced their arrival in politics and expected it to be easy, only to flame out. But unlike his failed predecessors, Trump possesses an unequalled instinct for connecting with voters and exploiting their grievances. One of his great weaknesses is also a great strength: He is willing to do and say almost anything, and he shows no sense of shame.

A Prolifically Mendacious Figure

The most important skill Trump learned in business and cross-applied to politics is media manipulation. His reputation in business always far outstripped his success, because he was so adept at courting coverage, and he quickly applied that to campaigning, offering nonstop press conferences and interviews (he only later curtailed access.) As the 2016 campaign showed, the traditional media is ill-equipped to deal with a prolifically mendacious figure like Trump. As a candidate, he perfected the art of making an outrageous and often false statement and then quickly changing the focus by replacing it with another outrageous and often false statement. This means that no story ever got full scrutiny, but Trump was constantly the center of attention. According to one media tracking firm, Trump captured the equivalent of $5 billion in advertising in the 2016 election. There’s no indication the mainstream press has solved the problem of how to cover Trump without playing into this ploy. If anything, it’s harder than ever to avoid taking his bait now because he’s the president of the United States.

Although Trump is deservedly known for his dishonesty, he is surprisingly dogged in pursuing his core campaign promises, even over the noisy objections of his Republican allies and even when it’s clear that by keeping a vow to his base, he is undermining his popularity with the nation at large. Though he has been repeatedly stymied, he has shown no indication of letting go of his dream of a wall on the border with Mexico. He has pursued trade wars even when they have begun to hurt American consumers and producers. He withdrew from the Iran nuclear deal over the objections of his advisers. His Supreme Court picks have been the conservative Christian crusaders he promised—in contrast to previous Republican presidents who, despite more religious piety and commitment to conservative ideals, chose moderate justices.

Trump is also expected to enter the election with a huge campaign fund. While he ran his 2016 race on the cheap, he won’t do that again. By summer of 2018, he had already amassed close to $100 million. Trump also benefits from a Republican Party that not only isn’t ambivalent about him, as it was two years ago, but has largely been reshaped in his image.

Finally, Trump could once more be lucky in his choice of opponents. Hillary Clinton was a slow-moving and clumsy candidate who cleared the field in 2016. The 2020 field is crowded, with no obvious standard-bearer. The Democratic primary will likely be expensive and bruising. While there are many potential candidates, all have major possible flaws: Too old (Bernie Sanders, Elizabeth Warren, Bernie Sanders), too young (Cory Booker, Kamala Harris), too boring (Kirsten Gillibrand, Eric Garcetti), too exciting (Michael Avenatti), too liberal (Sanders, Warren), too moderate (Biden), and so on.

Backlash against Midterm Winners

While Democrats are expecting midterm victories this November, there’s a real danger of overreach that comes with renewed heft in Congress. The party has already planned extensive investigations into alleged corruption as well as other schemes to confound Trump. It is true that Trump, as an unusually divisive figure who is despised by his opponents, is susceptible to inquiries. But aggressive pressure from opposition parties following midterm victories has backfired in the past. Voters swept Republicans into power in 1994 but opted to keep Bill Clinton two years later. After making Barack Obama’s life miserable by electing Tea Party Republicans in 2010, voters resoundingly reelected him in 2012.

Without knowing how the economy will perform for the next two years or a clear vision of how Democrats might behave with control of Congress, and without knowing whether Trump is likely to face a true crisis not of his own creating, it’s too early to declare him the 2020 favorite. But it’s well within reason that he could be.

Who Can Beat Him?

Nonetheless, Trump’s weaknesses are real, and it’s easy to envision him joining Jimmy Carter and George H.W. Bush as one-term presidents—one of the few things that would unite the three men. The question is who would beat him, and how.

Trump might choose not to run again. He will be 76 on election day 2020, older than any nominee in history. His first term has been beset with frustrations and investigations, he often seems plainly unhappy, and by some reports, he never especially wanted or expected to win in 2016. Given Trump’s defiant demeanor, it’s hard to imagine him ever resigning from office, but retiring after one term could give him a comparatively graceful exit. It would probably be a relief to him and the country.

Grace, then again, has never been Trumps’ strong suit. What would his opposition look like? At this stage, Trump seems likely to face some sort of primary challenge by fellow Republicans, with John Kasich generally considered the most eager contender. It’s no surprise that a president as unpopular as Trump would face a rival, but the president is in a surprisingly strong position to withstand it. Despite poor approval ratings overall, Trump’s remains extremely popular with Republican voters.

Though there will surely be calls for a third-party challenger, the American system as constituted continues to make it all but impossible for any third-party candidate to do more than play spoiler. Besides, the two most obviously formidable independent prospects have both ruled themselves out: Kasich said he’ll only run as a Republican, while perennial potential independent candidate Michael Bloomberg is exploring running as a Democrat.

The Democratic field remains packed and up for grabs, but the party’s options fit into three basic groups. The party could opt to nominate a reliable, familiar face: former Vice President Joe Biden, 2016 runner-up Bernie Sanders, or former Massachusetts Governor Deval Patrick. They could opt for a fresh face—Senators Cory Booker, Elizabeth Warren, Kirsten Gillibrand, or Kamala Harris; Governor John Hickenlooper of Colorado; or Los Angeles Mayor Eric Garcetti, to name a few. Or voters could choose a wild-card candidate. It’s a sign of the desolation of the Democratic Party’s ranks of leaders, following the down-ballot losses of the Obama years and Clinton’s defeat, that each of these paths is fraught with danger.

Take the old reliables. Biden has run for president before, and has never fared well. He has something of Trump’s touch with blue-collar voters, but otherwise is out of step with the Democratic Party of today. He would be 77 when inaugurated. Sanders, also at the end of his career, surprised most observers in 2016, but it’s still unclear whether his dyspeptic leftism has broad enough appeal in a general election. Patrick was a well-regarded governor, but he has little national profile.

Fresh faces have the advantage of novelty but the danger of being unproven. Warren might be the strongest (and oldest) of the bunch, though she’s only ever run in very liberal Massachusetts. The highly ambitious Booker is charismatic but a political cipher. Harris has captured the imagination of many Democrats, but she’s only just barely arrived in the Senate. Gillibrand has a longer track record and the advantage of representing wealthy and populous New York, but she isn’t the most exciting candidate. As for Garcetti, no mayor has been nominated for the presidency since 1812. Hickenlooper is a heartthrob for centrist pundits but his broader appeal is unproven.

Democratic voters could also decide to fight fire with fire and choose an outsider, celebrity candidate to mirror Trump. The appetite for such a plan became clear in January 2018 when a speech by Oprah Winfrey at an awards show sparked widespread calls for her to run for president. She demurred, but others may not be so restrained. Howard Schultz, the former CEO of Starbucks, is said to be considering a run. Michael Avenatti, the brash lawyer who represents Stormy Daniels, the porn actor and director who claims to have had an affair with Trump, has declared his interest in running and has even visited the key early state of Iowa.

Driving the Minority Turnout

The preceding analysis makes barely any mention of what is often portrayed as the central battle in the Democratic Party: between the center-left and the quasi-socialist left wing. If Sanders or Biden won the nomination, that dispute might become operative. Otherwise, it’s likely to be beside the point. For one thing, even the more cautious, moderate candidates like Booker have increasingly adopted Sanders-esque policy ideas like a guarantee of a job for all able adults. For another, the priority for Democratic voters as a whole in 2020 likely is to choose a candidate who can beat Trump, regardless of what particular platform he or she proposes.

Given the party’s increasing reliance on minority and women’s votes, it is however difficult to imagine Democrats nominating a white man to lead their ticket this year, and perhaps for several cycles to come. There are some members of the party who believe the best way to beat Trump is to win back the blue-collar white voters who once backed Democrats but flipped to Trump in 2016. But the prevailing view at the moment holds that in a party with a large crop of women and minority candidates, and given Trump’s divisive rhetoric about women and minorities, nominating a white man is politically untenable.

That may be true. If so, the result will be that the party leans hard on driving turnout among minority voters, just as Obama did. The Democrats will also be able to rely on heavy turnout in large, strongly liberal states like California, Illinois, and New York—which will inflate the vote for the party’s presidential nominee, but won’t affect the electoral college, since all three states are reliably Democratic. But they’ll still have to fight to win back the Rust Belt states Trump clawed away in 2016. The Democratic candidate in 2020 could win the popular vote by a landslide or by a small margin, but if they win the electoral college it’s likely be a very tight victory. Or they could find themselves stunned and defeated by Trump once more. 

The post White House Déjà Vu appeared first on Berlin Policy Journal - Blog.

© 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.

The post It’s Not Just Trump appeared first on Berlin Policy Journal - Blog.

© REUTERS/ Damir Sagolj

Dr Narlikar, the US and China have started a trade war, imposing tariffs on each other’s products. What does this mean for the EU? World value chains have been disrupted and EU stocks are down… It’s a difficult situation for the EU, for a variety of reasons. Yes absolutely, it’ll disrupt global value chains. In fact, there are several indirect effects that we need to think about. For example, the EU is looking into putting up import limits on steel imports because the expectation is that the US tariffs will lead to an even larger spare capacity from China in the global market. And this (spare capacity) would in turn drive down steel prices, which would threaten the EU markets, making the EU steel sector less competitive. That’s just one example. There are some scholars who are arguing that retaliation may not be necessary—they say we don’t need to get into an all-out trade war. It will be very difficult, though, to resist the pressures to go for retaliation.

What do you think about retaliation as an option? Before we go into the issue of retaliation, I’d like to make two points. First, not all of the issues that President Trump has been raising are ridiculous. There is this tendency by the media and scholars to ridicule everything that Trump says, but there is some truth, some validity, to the issues that he has been raising. For example, China does violate intellectual property rights. China does have stringent technology transfer requirements for investors. The Chinese market is not so open. China does make very effective use of loopholes in the WTO’s subsidies agreements. And Trump is tapping into something very fundamental, very visceral, within the US, and that is why a large proportion of the US population is still in support of his policies. It is the same part of the population that feels really let down by globalization, by open trade—the part of the population that believes (rightly or wrongly) that the gains of globalization have passed them by. And we have to take some of those concerns seriously. A failure to do so only polarizes the debate further and makes many of Trump’s supporters believe that he is their only hope—whereas some of these issues are systemic, they have also been raised by other countries and their populations and would be best dealt with through international cooperation.
Second, I must also emphasize that the way in which Trump is going about addressing these concerns is not good for anyone. It’s not good for the people he’s trying to help—these policies are not going to put “America First,” and they’re going to be costly for other countries as well. They’re not going to make consumers within the US better off, and they will also generate costs for many producers within the US, for example, those affected directly by higher prices for steel and aluminum.
Of course, the sensible way to deal with some of the issues, which Trump is now trying to address with his protectionist policies, would have been to discuss them in the WTO and to explore how the system can be reformed to accommodate the concerns of many people, not just within the US. Other countries have also raised similar concerns on restricted market access for their own exports, inadequacies of some of the agreements of the WTO that allow some countries to play the system too easily, and constant deadlock in the organization that makes it difficult for members to bring new issues to the table and also address some old ones. But (the reform debate at the WTO) is not happening, and now we are in this spiral of retaliation.
So having set that context, let me return to your question, which was: What do I think about retaliation? And my answer is: the EU at this point has very little choice but to use that as one tool. It has to stand up to what President Trump is doing. It has to explore retaliation, ideally under the WTO, so that it is still legal. We don’t all have to throw the rule book out of the window and go for unilateral retaliation, just because the US has done so. And that’s what many other countries are doing too—they are filing cases under the rubric of rules provided by the WTO. That’s what India, the EU, and Turkey have done. That’s what Russia and Japan are doing.
But there are two other very important moves that have to come with retaliation. First, we need to have a conversation about reforming the system to address the concerns of the many who feel marginalized by globalization more broadly and by certain aspects of international trade as we have it in the WTO. A little bit of humility will be crucial to go hand in hand with an acknowledgement that although trade tends to benefit countries in aggregate, its gains are not spread evenly within countries and it also produces losses for some sectors. Reform is necessary within societies, and also in terms of global governance. In some cases, reform will mean tightening the rules of the WTO.
In other cases, it may mean having more flexibility to allow countries to raise tariffs or other barriers under specified conditions, and also encourage countries to have better welfare policies that facilitate a better distribution of the gains from trade within their own societies. This conversation will be extremely important not only from the perspective of many of President Trump’s supporters, but also for the many dissatisfied groups within the EU and in other countries that are not convinced about the benefits of multilateral trade.
An important part of this discussion will be to make a clear distinction between the problems that come from trade and the problems for which trade is just the easy scapegoat. For example, job losses in some sectors in industrialized countries are happening, not because of trade, but because of technological innovation. Raising trade barriers is not going to solve this category of problems.
And second: I think the goal has to be to keep the US engaged and to bring the US back into the system. But we need to have other strategies in place as well. And here cooperation among other countries is very important. So for the EU, it is going to be really important to work with Canada, India, and Japan in order to try and develop a coalition of the willing of some kind, one that stands for liberal values, including trade openness and multilateralism.

On the subject of the WTO: The US has been undermining the organization, holding up judge confirmations, threatening to ignore it. Its demands have been vague, but what does the US want in terms of WTO reform? Right, this is something that has not been very systematically thought through. It should be. I’m not sure if the US even knows what it really wants, because we’re not seeing a very coherent strategy come out of this administration on trade, except for a strong expression of distrust of multilateral rules, coupled with some simplistic and misguided claims like trade wars are “easy to win” and that they will somehow put “America First.” And this stance is not going to achieve much for the US, or anyone else for that matter: trade wars are not easy to win, and they’re not going to put “America First.”
But if you look behind these sweeping claims, there seem to be some serious concerns that seem to underpin some of this discourse. These concerns are related to the way the international trading system has been working over the years and whether different people see this as fair. Even Trump is using the language of “fair trade,” though that too means different things to different people.
To me, there was an opportunity to have a systematic discussion about these concerns last year around the time of the G20 summit. And Germany tried to do precisely that—as the host country of the G20, it tried to get this conversation going. For example, in the G20 declaration in Hamburg, we have a reference to “legitimate trade defense measures.” Now, this is just the kind of issue we should be talking about if we want to address the concerns of those who believe themselves to be marginalized from the gains of international trade.
We need to ask ourselves, under what circumstances do we think trade defense measures can be legitimate? This needs spelling out because you can take all kinds of protectionist measures and somehow claim “legitimacy” for them. That’s why you need a forum like the WTO that can address these concerns at a multilateral level among different parties and then come up with a system of rules.
If the Trump administration had started a real conversation about how we might improve the rules of the system—how we can make globalization fair and sustainable for all (including Americans)—it would have found a much more sympathetic ear from the EU and many other countries. And we would have been making real progress because a lot of people have been pointing out problems of inequality and problems of marginalization of some countries and populations within them—the system does need reforming, and we could have been working on this critical agenda together.
Still, not all problems are to do with the WTO or global governance. The WTO creates a system of international rules that affords countries some negotiating space. International rules can also encourage countries to take on certain domestic measures. So while the WTO can’t order states to have better welfare mechanisms in place, the WTO can potentially say: “These are the problems resulting from dislocations that are happening because of trade, and they need to be addressed by having better distributive mechanisms within your own country. This is not something that we, the WTO, can regulate, but we can encourage you to address these concerns, and show ways in which some countries—like the Scandinavians—do this more successfully than others. There is a whole range of options that different countries could choose from, depending on their national social contracts.”
The WTO can really help frame this debate, point to good practices, and also help come up with better processes for its own decision-making that could allow it to function as a more efficient organization that is able to deliver results in a timely fashion. But the WTO itself hasn’t done very much on this, probably because it is a “member-driven organization.” And while this is certainly a constraint, international institutions can have some agenda-setting power even within such constraints. I believe that the WTO could take on more leadership in agenda-setting and putting good ideas out there.

I want to come back to the tariffs that the US and China have been putting on each other. Is there any possibility of European mediation to defuse tensions? Trump has been critical of the EU, but Europe shares some of the American concerns about Chinese behavior and perhaps shares Chinese concerns about America undermining the WTO. What role can Europe play between those two great economic powers? Mediation is perhaps not quite how I would see it—but working together with the US would have been a very smart route to take because the EU and the US have some interests that align well with each other. But it’s not one that we’re seeing Europe taking so far, not in any systematic way. Because you’re right, the US and the EU do share concerns about China. And these concerns are not only economic but also geopolitical. So for example, the US is discussing restrictions on Chinese investments in key sectors such as robotics, artificial intelligence, and aerospace. Those restrictions are in fact derived from geopolitical concerns.
The EU should really have these concerns too. The EU seems to be slowly waking up to the risks that China poses via the One Belt, One Road project, for example. Or what’s happening in the South China Sea dispute. These are just the avenues where the US and the EU should have a shared agenda, and they could do a lot to come together on these concerns. And it’s not only the US and the EU. It’s also countries in the region that are very worried—Japan and India for example—where we could see some systematic coalition building and action. This is an avenue that’s ideally worth exploring with the US. But the EU should also be talking about this with India and Japan.

What do the US-China tariffs mean for Germany specifically or German industries? Is there any chance that they might be positive in the short run if people are buying more European goods or is this all negative, disrupting world trade? We’re going to get some trade diversion, and yes, we’re going to get some trade creation too. One could see a real problem emerging specifically for Germany: if this escalating trend continues and China decides to tax US car exports to China, then German auto-manufacturers like BMW and Daimler, which have production in the US, would also be adversely affected. They might have to move their plants elsewhere if they are to remain competitive in the Chinese market. That would mean huge relocation costs and a disruption to global value chains.
Now, there are other countries that may win partly from the US-China trade war. For example, when the Chinese put up tariffs on US soybeans, Brazil is the obvious country to benefit as a major soybean exporter. Then there are other countries that are not so deeply integrated into global value chains, which will perhaps not be so adversely affected—New Zealand is one example. But if the trade war does spread—across products and countries—then we will see a global slowdown of growth, which will not help anyone.
Another big problem is going to be what happens within economies. And this includes the US. Trump’s steel and aluminum tariffs will bring some gains to US factories that were no longer producing these products, but producers that use steel and aluminum inputs will, of course, be very adversely affected. This would then extend to adversely affect other consumers and producers. We are likely to see a similar set of effects in other countries too. Some small groups that might gain—but also many that lose.

The EU is also signing new trading partnerships: Canada, Australia, and a new massive trade agreement with Japan. To what extent could that soften the blow of US and China tariffs? So ordinarily, I would say that regional trade agreements are not a good idea. When multilateralism works, you do not turn to regionalism, not least because you get a downward spiral for multilateralism as well: when you have the regional alternatives, there’s always temptation to go down the regional route because it might be quicker than negotiating a deal with 164 countries. But where we are now, you do need to have these bilateral, regional conversations—given especially how badly multilateralism is doing, not only because of the recent problems, but also because of the recurrent deadlocks that have plagued the Doha negotiations of the WTO.
In this context, countries may feel that they have little choice left but to take the regional route, especially if the WTO fails to use this latest crisis as a way to rejuvenate itself. And if this turns out to be the case, it would make sense to be inclusive with the regional trade agreements. And even better would be to have a group of like-minded countries which use this open regionalism as a building block towards reinforced multilateralism. This is where I would refer to a coalition of the willing, where you do have parties like the EU, Canada, and India determined to defend the liberal order. And I’m defining liberal order very broadly there because this is not only about trade.

Final question then: We’ve covered a lot of ground this morning. We’ve talked about US-China tariffs, retaliation, US tariffs on steel and aluminum, EU retaliation, other trade deals. Where do you see this going in the next few months, the next year? Do you expect more escalation between the US and China? Or do you see an off-ramp, a way that we could defuse tensions instead of retaliating? What do you see happening going forward? Given where we are right now, I think the chances for continuing retaliation and escalation between the US and China are high. That’s partly because the US administration’s policy appears to not be coherent on trade aside from the general rhetoric that we’re putting “America First.” We are not getting the clarity we need from the US side.
As I’ve said, it’s very difficult to resist the pressure of retaliation for countries that are involved, even when retaliation hurts your own consumers. Retaliation won’t make Chinese consumers better off. But because there’s a feeling that the US is tearing up the rulebook and consumers are suffering, it’s very tempting for governments to go down the road of retaliation. So I think there will be an escalatory dynamic.
Where I think there is still hope, where we might be able to rescue the situation, would be if we were to follow the three steps I mentioned earlier. First, rules-based retaliation. So not simply a knee-jerk tit-for-tat retaliation, but one that uses the WTO’s Dispute Settlement Mechanism and perhaps even involves coordination among different countries hit by US tariffs. Second, keeping the dialogue going with the US and exploring together how the system might be reformed. And third, more cooperation between other like-minded countries, forming a coalition of the willing, to defend multilateral cooperation plus free and fair trade.
And returning to the point you raised earlier, can the EU mediate between the US and China. Like I said, “mediation” isn’t perhaps quite the right term here, but the EU and US do share and should share many concerns about China’s rise. This is not only an economic issue; it’s a geopolitical issue. And some of these concerns are shared by other powers in Asia. So this is another area where coalitions of the willing could arise. These are the issues where I believe we still have hope. Hope that is not only driven by a defensive agenda that involves rescuing the situation, but hope that even allows us to think carefully about how the system can be reformed more fundamentally and have it work for all in a sustainable way.

The interview was conducted by Noah Gordon.

The post Trade Wars: The US, China, and Europe in Between appeared first on Berlin Policy Journal - Blog.

© REUTERS/Kevin Lamarque

By the end of this week’s NATO summit in Brussels, it wasn’t just European leaders who were leaving with negative feelings about America. Even the European journalists covering the summit left flummoxed and frustrated.

“Why do we have to put up with this?” one asked me. “I am so sick of America. Trump comes here and humiliates us and there’s nothing we can do about it.” Even the White House press corps, he complained, was granted a sizeable area in the summit’s press room, cordoned off from other media—the US was the only country with such a reserved space.

Indeed, the press seating arrangements seemed to mirror the general power dynamics in NATO itself. It is viewed by many not as an alliance of equal members committed to defend each other, but as an American military protectorate over Europe. Trump, breaking decades of protocol, acknowledged this on Wednesday morning during a fiery breakfast with NATO Secretary General Jens Stoltenberg. “We’re supposed to protect you against Russia but they’re paying billions of dollars to Russia and I think that’s very inappropriate.”

Trump was referring to Germany, and Berlin’s approval of a new pipeline to import Russian gas. Washington, and many others, say this will increase Europe’s energy dependence on Russia, and they should instead import US liquefied natural gas. “Germany is totally controlled by Russia,” Trump said, before citing a markedly incorrect figure for how much gas Germany already imports.

It was an unprecedented public display of aggression by a US president toward the NATO allies, and it was a humiliating blow to Merkel. When she arrived at the summit later, she told press that as someone who grew up in East Germany—a country that really was controlled by Russia—she is glad that a unified Germany is independent today.

But is it? To many, Trump’s remarks sounded like a protection racket. The American military protectorate comes at a price, and apparently that involves European countries surrendering sovereignty to Washington. In Trump’s view, Berlin is not free to make its own decisions as long as it is the recipient of American military protection.

Attack, Then Retract

Trump’s comments sparked such discord that he and Merkel hastily arranged a joint appearance before the media. Trump insisted that he has a great relationship with Merkel and relations between Germany and America are the best they have ever been. Merkel did not look convinced.

It is a tactic Trump uses often – attacking and then later insisting no attack was made. He did it again during his visit to London on Friday, criticizing Prime Minister Theresa May in an interview with The Sun tabloid newspaper and saying her rival Boris Johnson, who just quit her cabinet, “would make a great prime minister.” He later walked back his statements during a damage control joint press conference with May.

But his biggest lurch in tone came on Thursday. Around midday, reports emerged that Trump had threatened to pull the United States out of NATO unless countries immediately increased their military spending. Stoltenberg hastily convened an emergency meeting of the 29 NATO members to try to come to a solution. Trump then called an unscheduled press conference, where he said he had successfully strong-armed the Europeans into committing to spend more on their military. He was asked three times if that involved making a threat to pull the US out of NATO, but he didn’t answer.

“We have now got it to a point where people are paying a lot more money,” he said. “And if you talk to Secretary General Stoltenberg, he gives us total credit, I guess that’s me. He gives me total credit. Everybody in that room by the time we left, got along and agreed to pay more.”

Except they didn’t. French President Emmanuel Macron quickly contradicted Trump’s assertion, saying NATO members made the same commitment agreed at the 2014 summit in Wales – to aim to increase military expenditure to two percent of GDP by 2024. Inside the room, Trump had demanded that this be increased to four percent – even though the US itself doesn’t spend this amount. The other leaders said this was not only impossible, it would also be ill-advised to throw so much money at their militaries so fast.

For the rest of the afternoon, in press conference after press conference, prime ministers had to find diplomatically creative ways of saying Trump lied, without actually saying it. Asked repeatedly why Trump had made the claim that Canada will be doubling its military spending, Canadian Prime Minister Justin Trudeau repeatedly pointed out that Canada is increasing its military spending by 70 percent over the next ten years.

Nobody wanted to incur the wrath of the US president by calling out his untruth. In a particularly creative attempt, Belgian Prime Minister Charles Michel offered that it might be a question of differing interpretation.

A Shaky Alliance

It was a display of just how fractious the nearly 70-year-old alliance has become, and it had a lot of journalists asking why Europe should continue to put up.

In the short term, the answer is clear: Europe has relied on the NATO military protectorate for the last seven decades, spending little on their militaries and instead investing that money in generous welfare and healthcare systems. Even with the end of the Cold War and the supposed end of the Russian threat, nobody other than the French was suggesting that this arrangement might not make sense in the future.

The NATO system makes Europeans completely dependent on the goodwill of the United States to guarantee their protection because they would not be able to defend themselves from a Russian attack.

The EU has now launched a defense union, which got underway in earnest this year. But it will take years to develop to the point where it could actually serve as an effective coordinator of Europe’s militaries in the event of a conflict without American assistance.

The UK remains adamantly opposed to the EU Defense Union because they say it undermines NATO. But Britain is on its way out of the EU, and London can hardly object to the enhanced cooperation now.

But what exactly did Trump say on Thursday? Most accounts point to the president saying: ‘If you don’t increase your spending, then America may go it alone.’

Some officials have cautioned not to read too much into that, and that Trump may not have understood what he was saying. This is the interpretation that European leaders have chosen to accept, in public at least. Macron insisted that there had been no threat to pull the US out.

In private, officials acknowledge that this was obviously an implicit threat. The implications are serious. If the US did pull out of NATO, the alliance would become a hollow shell. The US is, obviously, the largest pillar, and Trump’s comments caused understandable alarm. A US exit could leave Europe relatively defenseless overnight.

Like most NATO summits, this ended with few tangible outcomes. Conclusions regarding increased military spending remained unchanged from the Wales goal – something most of the NATO members are well on their way to reaching.

In past years, these annual summits of NATO leaders have become more about putting on a display of unity and power, a message to the world, and particularly to Russia. But this year’s gathering highlighted the exact opposite, putting NATO’s weaknesses and serious divisions on full display.

And those divisions will be brought into sharp relief as President Trump meets Russian President Vladimir Putin in Helsinki.

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