World still has reasons to be fearful
Four weeks into Donald’s Trump’s four-year term, Dan O’Brien assesses what we have learnt so far about his impact on Europe
AFTER his first month in office, nobody would claim that the new US president has suddenly become what might have traditionally been described as “presidential”. Supporters and opponents alike agree that he is governing in the unconventional style in which he campaigned.
While that is largely true, not all of his most provocative promises have been fulfilled, and there has been some toning down of the rhetoric — not towards those whom he sees as his domestic opponents, but towards the rest of the world.
Most obviously, he did not launch a frontal economic assault on China by formally declaring it a “currency manipulator”, as he had promised to do on his first day in office. Nor have all of the consequences of his election been entirely negative for the rest of the world, Ireland included.
Since November, the dollar has strengthened, giving Irish exports to the US a competi- tiveness boost. The stronger dollar has also helped lessen the risk of a deflationary spiral in the eurozone.
Over the medium term, we on this side of the Atlantic could get another beneficial bump. If Congress legislates for an infrastructure spending plan and other stimulatory measures, the US economy could grow more rapidly than it might otherwise have done.
Nor has Trump sent much of his plentiful ire in an eastward direction across the Atlantic. Since becoming president, he has made relatively little comment on European or Irish affairs. Of the exceptions, one was when he raised both together — he claimed that the EU had prevented the building of a seawall at his Doonbeg resort in Co Clare.
But all of this, even taken together, offers little comfort. Most of the proposals and postures of the new administration give us cause for real concern, not least because of the enormous importance to Irish jobs, exports and tax revenues of corporate America.
Trump’s attitude towards Europe is one of many things that mark him out from his predecessors. This is of vital interest to Ireland because our international trade and investment takes place in the context of the EU’s rules-based single market and the EU28’s common external trade arrangements with the rest of the world.
With the solitary exception of a period around the Iraq invasion, when elements within the first George W Bush administration contemplated a divide-and-conquer strategy vis-a-vis Europe, the US has encouraged European integration since its inceptions. It has done so because it believed a strong, coherent Europe was in its best interests — whether as a bulwark against the Soviets in the past or as a natural supporter of most US positions in global affairs today.
Trump is very different. His ‘America First’ vision of relations with other countries is based on one-to-one dealing, rather than on messier multilateral arrangements. His logic appears to be that because the US is more powerful than any other country, conducting relations bilaterally will mean he always has the upper hand. There is certainly a logic to this, but most scholars of international relations argue that exclusive bilateralism, even for a superpower, won’t work in a world as complex and interconnected as ours.
The manifestation of this world-view when it comes to Europe means a natural antipathy towards the EU. Trump’s support for Brexit and his affinity for Nigel Farrage and other Eurosceptics is a more concrete manifestation. An even more concrete one would be for him to go ahead and appoint the man who is touted as the next US ambassador to the EU. Ted Malloch recently expressed a wish to see the EU fall apart and has a long-established hostility to European integration. His appointment to the Brussels role would be confirmation that Trump does not merely dislike the prospect of dealing with a united Europe, but that he actively wants to disunite it.
That Donald Tusk, the pro-American Pole who is president of the European Council, has publicly listed the Trump administration as a threat to Europe as great as Russia and terrorism speaks volumes about the concerns that exist. But it is not just multilateral-type structures that Trump has railed against. In speeches and tweets, he has aggressively lashed out against how the international economy functions, despite the US being one of the greatest beneficiaries of it over decades. Rather than believing that freely flowing trade and investment can result in gains for all, he takes a zero-sum game view of economic relations — what one country gains another must necessarily lose.
It could even be argued that his economic views are harder-line than his diplomatic ones. While a good number of the people appointed to foreign and security positions in his administration are quite traditional in their views (and could moderate Trump’s instinctive positions), the same cannot be said of his appointees on international economic issues.
Commerce Secretary Wilbur Ross is well known in Ireland for investing in Bank of Ireland when the economy was teetering on the brink of going Greek. He has long taken a view on international trade akin to Trump’s, believing trade rather technology is the cause of fewer US manufacturing jobs (the evidence strongly suggests that technology is the main cause).
Trump has appointed the protectionist trade lawyer Robert Lighthizer as US Trade Representative. He will oversee the almost certain abandoning of EU-US Transatlantic Trade and Investment Partnership, which has been under discussion for years, just as a similar deal with Asian countries has already been binned.
Perhaps most controversially is the man appointed as White House trade adviser. Peter Navarro is a very rare creature in the world of academic economics — an opponent of free trade. He is particularly exercised by China, believing that it poses a grave threat to the US, and has written a number of books on the topic. He also has controversial views on Europe — his charge against Germany two weeks ago that it was manipulating the euro for its own ends made international headlines.
All of this has come together in Trump’s backing for a proposal that would see hefty new taxes levied on goods coming into the US, a measure that is all but certain to fall foul of WTO rules.
The proposal has already got backs up. Last week the European Commission, which has exclusive competence on the legal aspects of trade relations for Ireland and the other 27 members of the EU, said that it was ready to respond to any measure that discriminated against EU exports to the US. If both sides erect new barriers to trade, economies on both sides of the Atlantic will suffer — and Ireland will suffer more than most, given how trade-dependent we are.
The longer term damage to the rules-based global trading system could be even more serious. For those who believe that the world needs global institutions and global governance structures to deal with global issues, the World Trade Organisation is pivotal. Unlike many other toothless international organisations, the WTO has a full-scale court structure whose rulings members accept. That includes the US, which is a regular litigant and complainant at the WTO in Geneva.
If the US were to reject an adverse finding by the WTO against a border tax or signal early in the process that it did not accept the jurisdiction of the body (Trump last summer described it as a “disaster”), then the linchpin of the entire international trading system would be in question.
One month into the Trump presidency, there is almost as much reason to believe that Ireland, Europe and the rest of the world will suffer negative consequences as there was on the day of his election. Hopes of a Trump-lite presidency have all but evaporated. Tumultuous times are ahead. Business section: How Trump’s tax policies could affect Ireland
‘Longer-term damage to global trading could be even more serious’