After Turnberry…

The trade agreement announced on July 27 by Donald Trump and Ursula von der Leyen has been greeted in the European Union by an unusual chorus of criticism, to which the Commission has struggled to respond in recent days.

At the heart of the criticism is the asymmetry of the “deal”: 15% tariffs on European goods versus zero tariffs on American goods, with a few exceptions on both sides, topped off with European commitments to purchase and invest in the United States. The European Union is criticized for having yielded, through weakness and without a fight, to the balance of power established by the American threat of much higher tariffs.

At the heart of the Commission’s argument at this stage are two essential points. Firstly, the negotiations averted a transatlantic trade war with highly disruptive economic consequences that nobody wanted, neither the Member States, divided on the countermeasures to be adopted, nor the business community as a whole, which is true. Secondly, in the uncertain geostrategic context of the Russian war in Ukraine, the European Union’s priority must remain to avoid an American disengagement, the consequences of which would be more catastrophic than a loss of markets in the United States, or even less growth in Europe.

In view of the elements available on the content of the agreement to date, making an assessment does not mean going back over the reasons for avoiding escalation – which is understandable, even if other tactical choices could also be conceived – but rather answering the question of whether or not the price to be paid for this retreat is justified, both economically and politically.

There are several reasons to doubt this :

• Firstly, this price is difficult to estimate and could turn out to be higher than expected, as several chapters, like most of the discounts mentioned, remain to be negotiated. Moreover, there is no real text of the agreement, but rather presentations from each side whose differences are beginning to emerge. In these conditions, to speak of an agreement is to rush to judgment. Much remains to be negotiated. Uncertainty also surrounds the prevailing legal vagueness as to the form the agreement will take, if and when it is agreed, in order to come into effect on the European side. What legal basis will be used for the necessary decisions, and what about the formal involvement, or otherwise, of the Council and Parliament? It’s a question of European democracy, of the need for everyone to take an open stand, and to move away from the hypocritical posturing favored by the obscurity of the negotiation process, or the facile criticisms levelled at the Commission when it is a matter of collective responsibility.
• European commitments to American purchases seem out of proportion with the reality of supply and demand on the energy side, and what’s more, hardly compatible with European decarbonization; in any case, including for investments promised on the European side, decisions do not fall under the authority of the Commission. Hence the likely difficulties of interpretation and implementation, in which the United States will retain the upper hand against a partner in a tactically weakened position for the time being.
• Other current or future transatlantic disputes are by no means “stabilized”, to use the Commission’s expression. They risk rapidly interfering with trade issues, as in the case of regulation of the financial or digital sectors, or even carbon adjustment at the border.
• Most importantly, the price to be paid is more political than economic. Not only is the EU accepting its weak position, it is also endorsing the return of protectionism and, even more seriously for the future, the use of coercion by the United States. Similarly, it endorses Trump’s reasoning that the transatlantic trade imbalance in goods (with no mention of the US surplus in services) is a customs matter, and can be corrected by both sides violating WTO rules. However, while trade flows will adapt to what can be likened to relative price changes brought about by tariffs or exchange rate movements, the same cannot be said of the negative effects, which are likely to weigh for a long time on the Union’s reputation and credibility, already damaged by the Commission’s failure to build an international coalition strong enough to dissuade Donald Trump and move beyond bilateral face-offs. The Chinese and Russians will be tempted to draw their own conclusions.
• The negative political effects are not limited to the outside world, but also concern the inside of the Union. Eurosceptic political forces have not missed an opportunity to mock the result as the opposite of the maxim that the union of Europeans is their strength. They will also argue that the United Kingdom has been treated better (although this argument is hardly valid, as the country has a trade deficit with the United States but is nevertheless penalized).

To get the full measure of what’s really at stake, we need to look at the big picture, and compare Turnberry’s 15% tariffs with the commitment made by Europeans at the last Nato summit in The Hague at the end of June, to spend 5% of their GNP on defense. For the European Union, these two episodes consisted in bending to the injunctions of the American President, at the cost of major concessions, ambiguities or imprecisions imposed by his style and haste, and therefore fraught with future disputes. In the name of preserving transatlantic cooperation, which the Union cannot do without exposing its populations to systemic dangers. In return for maintaining lasting strategic support, which neither the words nor the actions of the President of the United States and his administration can guarantee. Here lies the most worrying side of the asymmetry.

It may be argued that this is the geopolitical, and more precisely the geostrategic, reality of our times, and that for these reasons, the European Union has no choice but lay low for a while in the face of Trump’s assaults.

Breaking out of this impasse, i.e. taking the long-awaited path to strategic autonomy – in other words, to sovereignty – requires us to step up the pace of European economic and political integration. The roadmap is now clear: remedy our economic weakness and regain our competitiveness, as proposed by Mario Draghi and Enrico Letta; increase our defense capabilities; regain our place at the frontier of tomorrow’s technologies; diversify our trade relations with emerging countries.

May the Turnberry episode convince Europeans that we will need greater collective ambition, political will and cohesion to achieve this, and that the time has come to step up a gear, including in the next twists and turns  in our relations with the United States.

“Survival or decline” said Jacques Delors, then President of the European Commission, whose 100th birthday we have just celebrated. At the time, the phrase was considered pessimistic. Here we are.