Giles Merritt is Founder and Chairman of Friends of Europe
The EU's Trade Commissioner Cecilia Malmström has made a cardinal error in opting to play US President Donald Trump at his own game. A tit-for-tat trade war across the Atlantic will be lose-lose for both sides, and worse than that, Brussels' panicky imposition of "balancing" tariffs on some American products greatly improves Trump's chances of a second term in the White House.
The storm of European protests and vituperation that preceded the EU's retaliation was a waste of time. Trump’s focus is November's mid-term congressional elections. Hitting at goods produced in politically sensitive states and congressional districts will create an even more combative mood amongst the blue collar workers whose support is vital for him.
The question now is how can level heads on both sides of the Atlantic save the relationship from becoming uglier. Is it too late to correct the European Commission's mistake, and instead create a calmer and more constructive climate of opinion in America and Europe?
First things first; Trump has picked the wrong fight with the wrong people, and that in itself may offer a way out. The shared problem facing the US and EU isn't transatlantic rivalries for jobs and profits. It's the threat of increasingly tough competition from Asia, notably China. Getting that back onto the transatlantic agenda is key, and could do much to lower the temperature.
The question now is how can level heads on both sides of the Atlantic save the relationship from becoming uglier
There's already much lost ground to be recovered because we've come a long way from the glory days of US-EU cooperation. Ten years ago, the role of the EU's ambassador to Washington DC was to underpin America's most influential politicians. Now it is to undermine them.
When former Irish prime minister John Bruton arrived there in 2004 as EU ambassador, he transformed the post from the largely technocratic to the overtly political. For five years he criss-crossed the US to give valuable support and credibility to Congressmen and Senators, and Europe reaped rich rewards.
The EU Mission's current role has been to identify targets for retaliatory protectionism, like Bourbon whiskey from Kentucky and Wisconsin's Harley-Davidson motorcycles.
Trade is of far less importance than investment, which is where both sides now risk lasting harm. Two-way trade in goods across the Atlantic runs at about half a trillion dollars a year, with services worth another trillion. This trade is dwarfed, however, by corporate investments that currently represent over $20 trillion in assets.
European companies account for about three-quarters of all foreign investment in America, while two-thirds of all US investment abroad is in Europe. If mutual confidence across the Atlantic starts to be destroyed, the economic consequences would be disastrous.
Europe's corporate chieftains should lead the way by backing an EU-led revival of TTIP as the way to defuse mounting tensions
Europe's response to Trump's trade war should have been to avoid precipitate retaliation. The Democrats have a chance of winning back a narrow majority in the House of Representatives in November, and that will be severely compromised once a US-EU trade war is unleashed.
The Republicans' loss of the House, and even of the Senate although that seems less likely, would bring Trump's iconoclastic 'America First' drive to a stuttering halt.
The tactic now available to Brussels is to move for a revival of the Transatlantic Trade and Investment Partnership (TTIP) that both sides abandoned in the dying days of the Obama Administration. The EU obviously has to respond to Trump's unilateral protectionism, but it must do so with an olive branch rather than a sword.
Europe's corporate chieftains should lead the way by backing an EU-led revival of TTIP as the way to defuse mounting tensions. That wouldn't happen overnight, but the simple act of proposing it would rob Trump of the initiative and of a war cry at America's crucial mid-term elections.
You may also like:
- Friends of Europe: Development needs to reach last mile
- Europe's World: A Trade war between Europe and the US - possibilities and consequences, by Fragkiskos Filippaios
- Debating Europe: Does the EU treat all its Member States equally?
IMAGE CREDIT: CC/Flickr - European Council President