Blog Post

The EU must stand ready to confront US leadership

This is not the first time that the United States has antagonised Europe. And Europe can provide an effective response to such external challenges when it stands united.

By: Date: February 3, 2017 Topic: Global Economics & Governance

The new US administration’s recent policy measures and criticisms against Europe have so far provoked little reaction from EU leaders. US president Donald Trump was in The Times and Bild on 16 January, and wheeled out a number of clichés against Europe. French and German leaders reacted by merely re-affirming Europe’s readiness to protect its own values and interests.

German chancellor Angela Merkel said that ‘we Europeans have our fate in our own hands.’ French president François Hollande said that ‘Europe will be ready to pursue transatlantic cooperation, but it will be based on its interests and values (…). It does not need outside advice to tell it what to do.’ But so far EU leaders’ reactions have remained at the level of general declarations. Indeed, there still seems to be a widespread perception that the EU is too weak an organisation to stand firm vis-à-vis the United States’ policy choices.

Part of this perception comes from the fact that the United States famously encouraged and protected early efforts to unite Europe. The Marshall Plan and the subsequent creation of the Organisation for European Economic Cooperation (OEEC) are often taken as the start of post 1945 European integration. They are prime examples of positive US involvement in Europe. By providing economic aid and supporting Europeans to organise themselves, the United States played an important role in the origins of European integration. In addition to this economic support, the United States also provided a military umbrella over Western Europe after World War II. Therefore, economically and militarily, the European Union developed in a transatlantic cocoon.

Should we be surprised, then, by the recent negativity on the part of our transatlantic ally? This is certainly not the first time that US foreign policies have been directed against European interests. It is important to realise that on several past occasions, the EU did prove able to react forcefully, protect its interests, and modify the course of US foreign policy in Europe.

In foreign policy, the overcoming of the cold war order in Europe is an excellent example of the success of European diplomacy in the face of the alleged hegemony of the US, and indeed also the Soviet Union. For instance, in the late 1960s/early 1970s, US strategy mostly consisted in perpetuating the bipolar order, and thereby the division of the European continent. By contrast, Western European governments and the then European Economic Community (EEC), the EU’s predecessor, aimed to slowly transform European relations in order to overcome the cold war partition of Europe between East and West.

The policy of the EEC and Western European governments contributed to showcase a European voice, distinctive from its transatlantic ally. The Helsinki Final Act – which the EEC signed – crowned these diplomatic efforts. The most recent historical literature points to the fact that EEC member states acted together within the EEC framework to promote the process of European détente. The EEC/EU showed that it did not need the advice of the United States to decide on its fate.

In trade, a united EU reaction to US policy has also proved very efficient. In the early 1980s, the Soviet Union started building a natural gas pipeline to supply Western Europe. In order to do this, the Soviet Union needed financing, equipment, and technology from the West. Many Western European countries welcomed the construction of this pipeline, as it would contribute to diversify their imports of natural gas. The US administration, by contrast, severely criticised the initiative.

The United States targeted four EEC member states in particular – France, Italy, West Germany, and the United Kingdom – for having concluded contracts related to the construction of the new transcontinental gas pipeline. Through this trade, the US administration argued, European countries were effectively supporting the Soviet Union. In 1982, US president Ronald Reagan decided to impose an embargo on all equipment manufactured by Western firms – including British, French, Italian, and West German – under license from US companies involved in such a trade with the Soviet Union.

These EEC members reacted with outcry. But instead of reacting separately, these four countries coordinated their response through the EEC and its then embryonic foreign policy, called European Political Cooperation (that was also the mechanism involved in Helsinki). Faced with this strong opposition, Reagan backed down, and lifted the embargo. A coordinated EEC response proved again that it could make a difference.

In the monetary realm, the EU has also been capable of prompt and effective reactions. The whole story of European monetary integration showcases the affirmation of Europe on an international stage dominated by the dollar and its harmful fluctuations for European economies. In monetary affairs, US actions have been more often than not directed against Europe’s own efforts. For instance, when US president Richard Nixon decided on 15 August 1971 to put a brutal and unilateral end to the gold-dollar link and introduce an import tax, the US administration clearly aimed to disrupt European efforts at monetary unification. And it momentarily succeeded in doing so.

In the late 1970s, the US administration pursued an economic policy that led to the collapse of the dollar on international currency markets. This endangered European economies, in particular West Germany. The then West German chancellor Helmut Schmidt, upset by what he perceived as a US ‘malign neglect,’ called for a proper European reaction. This reaction took the form of the European Monetary System (EMS), created in 1978. In presenting the EMS to the Bundesbank, Schmidt explained that Europeans could not remain passive in front of US unilateral actions that had consequences on the world economy. Schmidt declared that ‘it was urgently necessary that the Europeans say to the Americans: that’s not going to carry on.’

Such past examples should remind European policymakers of the EU27’s potential strength on the international stage vis à vis the US. The EU27 can do little to change the predetermined policy inclinations of the new US administration. But what the EU27 can do is to gain full confidence in its capacity to influence the course of international events by being coherent, consistent, and united. There is no reason for the EU to shy away from its duty to protect its citizens’ interests and uphold their values internationally. The EU27 must be ready to say to its transatlantic ally, whenever the US administration puts at risk European interests and values: this is not going to carry on.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

View comments
Read article

Blog Post

The Iran nuclear deal crisis: Lessons from the 1982 transatlantic dispute over the Siberian gas pipeline

A US president taking a unilateral decision that affects European interests; European policymakers outraged at US interference in their affairs; European businesses fearing losing access to some international markets – sound familiar? This is the story of a crisis that took place in 1982 regarding the Siberian gas pipeline project; its outcome should inspire optimism in the Europeans’ capacity to counteract Donald Trump’s decision to withdraw the US from the Iranian nuclear deal.

By: Emmanuel Mourlon-Druol and Angela Romano Topic: Energy & Climate, European Macroeconomics & Governance Date: May 23, 2018
Read article More by this author

Blog Post

The EU should not sing to Trump’s tune on trade

The US threat of trade sanctions has put the EU in a difficult position. Nevertheless, the EU must respond decisively – not just to protect its own interests but those of the multilateral trading system, and to demonstrate to the US and other partners that trade is not a zero-sum game.

By: Maria Demertzis Topic: European Macroeconomics & Governance, Global Economics & Governance Date: May 17, 2018
Read article More by this author

Blog Post

Europe needs a broader discussion of its future

When thinking about what will determine the prosperity and well-being of citizens living in the euro area, five issues are central. This column, part of VoxEU's Euro Area Reform debate, argues that the important CEPR Policy Insight by a team of French and German economists makes an important contribution to two of them, but leaves aside some of the most crucial ones: European public goods, a proper fiscal stance and major national reforms. It also argues that its compromise on sovereign debt appears unbalanced.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: May 4, 2018
Read article More on this topic

Blog Post

Structural Reforms 0.0 – The case for strengthening institutions

Improvement in institutional quality, particularly concerning the rule of law, is the most essential and urgent structural reform the EU can make. Without it, the obtrusive lack of trust in the EU – which has thus far hampered expansionary and reformist efforts – will persist.

By: Maria Demertzis and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: May 3, 2018
Read article More on this topic More by this author

Blog Post

European income inequality begins to fall once again

Following almost a decade of relative stability, income inequality within the EU recorded a sizeable decline in 2016, reaching its lowest value since 1989. The fall of both within- and between-country inequality contributed to the 2016 reduction in overall EU inequality.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: April 30, 2018
Read article More on this topic

Opinion

Germany’s export-oriented economic model is caught in a US-Chinese squeeze

The new Merkel government has to reduce the dependencies on exports by stimulating domestic growth forces in Germany and Europe. At the same time, Berlin should push for a more ambitious national and European innovation policy as well as a robust European foreign trade policy.

By: Sebastian Heilmann and Guntram B. Wolff Topic: Global Economics & Governance Date: April 30, 2018
Read article Download PDF More on this topic

Policy Contribution

Making a reality of Europe’s Capital Markets Union

It is high time to make the CMU project real.The authors of this publication suggest that capital markets will only transform with concrete action and that ESMA reform should be a priority but cannot be the only one. Policymakers need to set priorities that will move the project forward.

By: André Sapir, Nicolas Véron and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: April 27, 2018
Read article More on this topic More by this author

Blog Post

Trade Wars: what are they good for?

Following the US announcements in early March of their intent to impose steel and aluminum tariffs, and the subsequent threats from China to retaliate with their own tariffs, the global trade picture remains uncertain. The IMF and the World Bank Spring Meetings set off amid US-Japan bilateral negotiations and Trump’s hot-and-cold approach to the TPP. This week we review blogs’ views on tensions over international trade and how they can impact world economic growth.

By: Inês Goncalves Raposo Topic: Global Economics & Governance Date: April 23, 2018
Read article More on this topic More by this author

Blog Post

The debate on euro-area reform

A paper jointly written by 14 French and German economists set off a debate about the reform of euro-area macroeconomic governance. We review economists’ opinions about it.

By: Silvia Merler Topic: Finance & Financial Regulation Date: April 16, 2018
Read article More on this topic

External Publication

Europe in a new world order

The EU is a relatively open economy and has benefited from the multilateral system. We argue that the EU should defend its strategic interests. The Singapore ruling has offered a useful clarification on trade policy. Addressing internal imbalances would also increase external credibility. Finally, strengthening Europe's social model would provide a counter-model to protectionist temptations.

By: Maria Demertzis, Guntram B. Wolff and André Sapir Topic: European Macroeconomics & Governance Date: March 26, 2018
Read article More on this topic More by this author

Blog Post

Are we steel friends?

The U.S. administration is considering to impose tariffs on steel (25%) and aluminium (10%), based on a national security argument. We review economists’ views about this major shift in U.S.’ trade policy.

By: Silvia Merler Topic: Global Economics & Governance Date: March 12, 2018
Read article More by this author

Podcast

Podcast

A conversation about U.S. steel and aluminium tariffs

In this podcast our senior fellow, André Sapir discusses with Uri Dadush, non-resident scholar here at Bruegel about President Trump's announcement to apply a 25% tariff on all steel and a 10% tariff on all aluminium imports into the United States.

By: The Sound of Economics Topic: Global Economics & Governance Date: March 9, 2018
Load more posts