The Economics of Post-Atlantic Europe

To understand what impact the Trump Administration will have on European economic performance you have to start by re-examining the lessons of the past. Almost 50 years ago, Richard Cooper published a ground-breaking book in the United States called: The Economics of Interdependence. He conceived this book during the early 1960s while he was working as an economic policymaker in the Kennedy and Johnson Administrations, and he developed the argument as part of a high-level study group within the Council on Foreign Relations. These details are important because the message Cooper had to communicate was controversial, particularly coming from a member of the foreign policy establishment. No country, he argued, not even the United States, can ignore how other countries react to their economic policies. The problem is not good diplomacy (or good manners). It is structural. If policymakers ignore how other countries react to what they do, then they will never achieve their objectives – because the reactions of others can do much to offset any benefits a discrete policy action may deliver. Indeed, a country will be worse off going it alone than working with others. Compromise and cooperation are always better than having countries set their economic policies at cross-purposes.

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U.S. Foreign Policy and the Transatlantic Relationship

As candidate, Donald Trump made a number of comments about the utility of the North Atlantic Alliance and about the virtues of European integration that left many in the establishment scratching their heads. When he was elected President of the United States, Trump did very little to soften his tone. On the contrary, the Trump White House floated the names of potential ambassadorial appointments who talked about the transatlantic relationship and the European Union in even more disparaging tones. Of course, this could all be marked down as campaign bluster and the hiccups that come with any transition into office. Other more seasoned politicians and diplomats have challenged Europe to do more for NATO and many have expressed exasperation with the transatlantic partnership. Former Defense Secretary Robert Gates and Assistant Secretary of State for European Affairs Victoria Nuland are two obvious examples, but the list is a long one. Nevertheless, the positions taken by Trump with respect to Europe both as candidate and as President are unusual enough to warrant putting them into context.

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Great Powers Matter

International regimes for the management of inter- and intra-state conflict only work when they can operate in a stable regional security environment. International mediators can have the most skillful negotiators, the most credible ‘honest-brokers’, the most attractive incentives for peaceful reconciliation, and the most sophisticated political institutions for power sharing, but they are unlikely to succeed without the determined support of Great Powers and so long as there are other powerful actors in the region who encourage one side or the other to resort to violence. Moreover, this is an enduring feature of international relations; it was as true during the interwar period as it is now that the Cold War has ended. Security is a nested condition that policymakers and diplomats create from the outside-in and not from the inside-out.

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The Disintegration of the West

The British vote to leave the European Union (EU) is the first step toward formal disintegration that the West has experienced.  The closest parallel is France’s decision to step outside the integrated military command structure of the North Atlantic Treaty Organization (NATO) in 1966.  But France remained a member of NATO; that decision was more like Britain’s opt-out from the single currency or Schengen, even if the shift of NATO’s headquarters from Paris to Brussels made it seem more dramatic.  By contrast, the British have now decided that they do not want to take part in the EU and that they want to renegotiate their relationships with the rest of the world on a case-by-case basis.  The West has not gone through anything like this since the end of the Second World War.

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The United States Needs Europe

‘In an interconnected world, there are no global problems that can be solved without the United States, and few that can be solved by the United States alone.’ United States National Security Strategy, 2015, p. 3.

‘A strong Europe is our indispensable partner, including for tacking global security challenges, promoting prosperity, and upholding international norms.’ United States National Security Strategy, 2015, p. 25.

 

The United States needs strong allies in Europe. The United States also needs European unity. This is has been a recurrent theme in Barack Obama’s foreign policy since the start of his campaign for the presidency in 2007. It is a theme he borrowed from the second administration of George W. Bush. It is also one of Obama’s greatest disappointments in shaping U.S. relations with the outside world. From the outset, both Obama and his predecessors have been explicit that the United States needs Europe’s strength to promote world order and uphold democratic values. U.S. foreign policy is most effective when it works in concert with Europe. It is least effective when coordination across the Atlantic falters or when Europe is divided or distracted. Future U.S. Presidents will struggle to adapt if European division and distraction becomes the norm. In fact, that may be happening already. Despite the strong language of his 2015 National Security Strategy, President Obama seems to be moving in a direction that relies less on trans-Atlantic cooperation.

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U.S. Presidential Elections – Known and Unknown

The U.S. Presidential elections represent a stark choice between a competent if unexciting continuation of the status quo and an emotional – perhaps even terrifying – break with the past. Moreover, the results of the contest will be felt far beyond the borders of the United States. On 17 and 18 March, I was invited by the United States consulate in Milan to participate in a series of events to explain the ongoing elections. The audiences were mostly Italian but there were some others mixed into the groups as well. My goal was give some sense of how the U.S. elections are going to have an impact on the outside world. That impact will be both direct and indirect. The direct effects will come through the change in U.S. foreign policy. The indirect effects will come through the change in economic policy. I outlined the two issues in turn. Then I offered some thoughts on the future of U.S. global leadership. The bottom line in all three cases is very similar: Americans must choose between the familiar and the unknown – and the world must accept the consequences.

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