In demolishing the way the international system is structured, Donald Trump is reshuffling the pack of power cards. It’s up to Europe to capitalize on it.
History is not only on the move; it is tilting over. Since 1917, the USA has been been in a leadership position. Since 1945, it has been underpinning the international system, the security of democracies and capitalism in return for the hegemony of the dollar and the exercise of US law beyond its borders. In the space of a year, Donald Trump has liquidated this legacy by isolating the USA and turning it into a risk for the political and economic stability of the free world. The G7 at La Malbaie in Canada records the fracture that now exists between the USA and their allies as well as a return to the law of the jungle because of the disintegration of the institutions and rules which enabled conflicts to be prevented and violence to be limited. The summit ended in an unprecedented fiasco.
Instead of “removing misunderstandings” as promised by Emmanuel Macron or easing tension, Donald Trump announced an extension of the trade war to the automobile industry. Disagreement has reached a crucial level with protection measures being justified by US national security. It has been increased by the incoherent proposal to bring Russia back into the G8 while Vladimir Putin’s threats have increased afer his speech on 1st March and a new batch of sanctions has been decided on because of the Skripal affair. Japan is concerned about the Singapore summit to which Donald Trump seems to be improvising his approach in complete contrast to the methodical preparation of Kim Jong-un. Finally, discord among the democracies hit a personal note when the American president, in thanking his host, Justin Trudeau, chose to call him “dishonest and weak”.
The USA has plunged the world into a trade war that has not been seen since the 1930s. Donald Trump may well have been obliged to give up on the 20% border tax on imports, but he has withdrawn from the Transatlantic Partnership and is about to dissolve ALENA de facto in favor of separate negotiations with Canada and Mexico. At the same time, surtaxes of 10 and 15% have been imposed on steel and aluminium imports, and waves of sanctions have been imposed on Iran and Russia. The targets of the upcoming escalation are well-known: on the one hand, the automobile industry (out of a total US market of 17.23 million vehicles in 2017, 8.7 million vehicles were imported), aiming at Germany in particular, which has 40% of the luxury market; on the other hand, the WTO, which has been disqualified and denounced for being a multilateral organization.
The primary effects are economic. The USA is making the same disastrous mistake as it made with the Hawley-Smoot Law of 17th June 1930 which, by increasing customs duties fro 38 to 59% on over 20,000 products, worsened the American recession and triggered a competition in protectionism and devaluation that caused the loss of three-quarters of world trade and payments over a decade. Direct foreign investment already fell by 23% in 2017.
The strategic impact is even more worrying. In order to get round Congress, Donald Trump has used national security reasons as justification for his protectionist measures. The final paradox is that they mainly target US allies. Overcapacity and unfair practices pertain to China, whereas the sanctions are targeting Europe, Canada, Mexico and Japan. By way of example, there is the lifting of sanctions against ZTE, which poses a real threat on the technological front, in exchange for a reduced fine of 1.4 billion dollars and Beijing’s permission for Qualcomm to buy NXP. Europe is therefore threatened with becoming the adjustment variable in the trade and technology rivalry between Washington and Beijing. Collateral damage to NATO and to the alliances with Japan and South Korea are inevitable.
Whilst the G7 summit was being torn apart, the Shanghai Cooperation Organization summit was taking place on 9th June in Qingdao. This brought together – at the invitation of Beijing – China, India, Russia, Iran, Pakistan and various other Asian countries. They were united in contesting American protectionism as well as the reassessment of the Vienna agreement on Iranian nuclear power. The summit was the occasion for Xi Jinping to promote the “silk roads” which involve an investment of more than 1,000 billion dollars in 900 projects, taking advantage of US withdrawal. They enable Beijing to export its total-capitalist model whilst at the same time, by means of debt leverage, to take control of certain countries and of infrastructures that are crucial to globalization.
In demolishing Western solidarity and the way in which the international system is structured, Donald Trump is underlining the usefulness and the assets of the European Union. In contrast to the suicidal route taken by the United Kingdom with Brexit, the European Union of 27 – if it remained united – can bring its weight to bear because of its 450 million consuers, its rule of law and the euro, which should be made into a currency that is a fully international means of payment. The calamitous La Malbaie G7 should be a wake-up call for Europeans and make them put their words into actions: tightening up compensatory measures from 2.8 to 6.4 billion to maintain strict parity with the USA; setting up protection to prevent what Beijing has announced as a 200 billion trade surplus with the USA falling into the open market; supporting multilateralism with Canada, Japan, Korea, Mexico and Latin America; engaging with countervailing powers and civil society in the USA; defending democratic values: human freedom and dignity, respect for the rule of law, the search for compromise as opposed to the cult of force. Machiavelli quite rightly stated, “One makes war when one wants, one ends it when one can.” Donald Trump will find out to his cost that this also applies to trade wars.
(Column published in Le Point, 14th June 2018)