Argee Abadines Reports Now that Donald Trump is finally US president, Europe is concerned about his policies, especially his economic policies, because America is Europe’s most important trade and investment partner. Winning on a protectionist platform, Trump has made true his promises. He has exited the Trans-Pacific partnership and is threatening to make renegotiations on the NAFTA deal.
Donald Trump and his Protectionist platform His protectionist and isolationist stance has good intentions. He wants to bring jobs back to America. He believes free trade agreements bring industries out of America and this poses the problem of unemployment. According to Tom Linebarger, CEO of Cummins Inc. and chair of the Business Roundtable International Engagement Committee, Trump’s belief is a big mistake. He says, “The fact that our major foreign competitors-China and the European Union are moving forward with their own trade agreements in the Asia-Pacific will make it even more difficult for the United States to compete.” This retreat of America as the economic world leader will impact the world and allow China to become the de facto economic world leader. With such a stance on free trade, there is little hope for the Transatlantic Trade and Investment Partnership (TTIP) deal to push through. This was an Obama plan designed to help American technology and service companies to enter the EU market. For the EU, this would mean boosting economic growth, increase investment and create new EU jobs. Economic growth in Europe has been stagnant and the TTIP would have been a significant catalyst to revive the continent , given that America and the EU are the two biggest markets. This means that China and Europe now needs to work closely together to boost trade and investment to counter Trump’s isolationist policy.
The UK, having decided to exit the EU, is likely to push for a bilateral trade agreement with America and help sustain their good economic growth. But if Trump finally realizes that it’s impossible not have job losses in free trade agreements, then these bilateral agreements will fail. He has to realize that while there may be industries that decline because of free trade, new industries can rise to replace it, thus creating new jobs and creating economic prosperity for all parties. Europe is poised to lose heavily from UK’s exit from the EU as it is the second largest economy in the union. Plus, the UK holds a permanent seat in the UN’s Security Council which would have helped protect the UK’s interests. Trump has repeatedly praised UK’s decision to exit the EU. Clearly, Trump has the UK higher on his agenda rather than the EU.
According to Moody’s, Trump’s economic policies can lead to a recession and thus will have a big impact on Europe, with its already fragile state, which is still recovering from the Eurozone debt crisis. They project that there will 3.5 million fewer jobs and unemployment rate as high as 7%. Stock prices and real house values will also decline. Given that Europe has invested trillions of dollars in the US economy, the value of their assets in the country will decline significantly and can trigger more problems back home. The Euro will become battered.
However, all is not lost. European Union Trade Commissioner Cecilia Malmstrom said, “Yet even if the U.S. is our most important partner, and a necessary one, the world is bigger than one country. Trump or no Trump, we have a long list of many others willing to deal with the EU, and about twenty more trade deals already in the pipeline.” The EU has recently signed a free trade agreement with Vietnam, one of ASEAN’s largest growing economy. With this kind of mindset, Europe may be able to weather the destruction that the Trump Presidency is likely to unleash on the world economy as well as the impact of Britain’s exit from the EU. German Economy Minister Sigmar Gabriel said that Europe should focus on the Pacific and Asia, including China and India.
Trump and NATO
Trump also believes that the North Atlantic Treaty Organization (NATO) is obsolete which can be attributed to the group’s failure to prevent an Al-Qaida attack on American soil and the birth of ISIS which is now a global threat. NATO is a political and military alliance between 28 countries, including most of EU and the U.S. Trump also believes America is spending too much in this treaty and wants members to cough up more money for their defense systems. He says, “We have spent trillions of dollars over time on planes, missiles, ships, equipment building up our military to provide a strong defense for Europe and Asia. The countries we are defending must pay for the cost of this defense. And if not, the U.S. must be prepared to let these countries defend themselves.”
As of 2015, only 5 out of the 28 NATO countries spent the minimum 2% of GDP on national defense. Big economies like Germany and Canada have not met this requirement. The only ones complying with the requirement are Greece, Poland, Estonia and the UK. However, it seems that the other members are agreeable to Trump’s demands. This lessens the risk that America will withdraw from the agreement.
America has the strongest military might in the world and if Trump doesn’t honor the NATO treaty, then Baltic nations in Europe become very vulnerable to Russia’s recent review of its terms on Baltic nations that declared independence out of the Soviet Union in 1991. Latvia, Estonia and Lithuania are in big danger from Russian invasion if there are no American forces in the Baltic region. Putin and Trump seem to be on good terms and thus Trump can play a significant role in making sure that the Baltic region remains peaceful. With Europe still reeling from the Eurozone Crisis, it will be difficult to commit more funds to their national defense but with Trump on a roll in fulfilling his campaign promises, it’s best to comply or else Russia will pose a significant threat without America’s military might. Russia invaded and annexed Ukraine’s Crimerian peninsula in 2014.
If America ever withdraws from NATO, then Europe will be forced to band together once again to replace the military alliance. However, with the fragile state of the zone and strong populist sentiments, it will be difficult to push for such an agenda. But this can also be an opportunity for Europe to strengthen their relations and boost further their economic ties. According to Former US Ambassador to Germany, John Kornblum, “The America Umbrella over Europe is gone forever. Trump’s election marks the end of the postwar order.”
The Return of the Populists
Trump’s victory can lay the foundation for European populists to take charge from the globalists. In fact they are already copying Trump’s campaign slogan. They will tap into the frustration and anger of the populace to win the elections. Human and gender rights are likely to take a backseat as well opening up a humanitarian crisis across the region.
In Germany, the populist Alternative for Germany has focused on the negative consequences of German Chancellor Merkel to allow refugees into Germany. In Netherlands, populist Wilders had created a one-page manifesto that called for the closure of refugee centers, mosques, Islamic schools and a ban on the Koran. Netherlands will have theirs in March 2017 while France will hold its national elections this coming April or May.
Other European nations with strong populist sentiments include Germany, Italy, Austria, Poland and Hungary. In the long run, this can trigger another Eurozone crisis and lead to a permanent breakup of the union and the collapse of the euro currency.
Trump’s victory will be an inspiration to the populist anti-establishment parties such as the French Front National. Along with this rise are issues of xenophobia and racism. This can create social ills in Europe as anti-Muslim sentiments rise and the refusal to allow entry of refugees. By closing borders, a country limits innovation and progress because immigration can bring in new ideas and provide new avenues for growth.
Another problem with nationalism is that it has led to the world wars. By weakening alliances such as NATO, the EU could weaken and members could start to break away from the union to focus on their own interests. The economic prosperity and peace for six decades that the Europe enjoyed as a result of collaboration and co-operation, can come to an end.
European countries may also find themselves flooded with daily protests from the resistance groups just like what is happening at the anti-trump demonstrations since his inauguration. In fact it has already started.
Will Europe decide to craft its own future or will it ignore Trump and engage the help of the rest of the world through collaboration, trade and investment? Europe has slowly recovered from the recession of 2008 but the Trump presidency poses the risk of Europe falling back to recession. Within the year, we will be able to see what Trump really holds for Europe.