"US makes no apology": EU on the verge of trade war
Serhey Bohdan's scenario

ANALYTICS  05 December 2022 - 13:49

The Russian-Ukrainian war has forced Western countries to unite and tone down the discussion of their differences. But now these serious and insurmountable differences are beginning to surface again in the form of harbingers of a European-American "trade war" and EU resistance to attempts to severely isolate China. For third countries, including Azerbaijan, these clashes among world powers are creating opportunities to assert their legitimate demands more vigorously.

War to some is a boon to others

Last week, the French president paid a five-day (!) visit to the United States. The White House tried to give the impression that the Ukrainian problem would be the main topic of the negotiations. They say there is a spirit of cooperation in the western camp - everyone is busy with the repulsion of Russian aggression.

But it's more complicated than that. The Wall Street Journal, a well-informed financial publication, wrote on November 30 that Macron and other European leaders resent US policies that exacerbate the economic consequences of the Russia-Ukraine war, particularly in the energy sphere.

EU countries are particularly unhappy about two new laws passed in the US last summer. First, the "Inflation Reduction Act," which threatens European industry. According to it, the US government will allocate $400 billion in subsidies and tax breaks for US companies and consumers when purchasing certain US goods. These preferences will deal a crushing blow to European competitors - since non-tariff barriers between the EU and the US have largely been eliminated, European businesses will face a tough choice - to bear losses or move to the US.

Secondly, Europeans are concerned about the so-called "Chip Act", which is designed to promote the expansion in the US of its own production of advanced semiconductors - one of the key components of modern technological development. To do this, the US government intends to seek technological autonomy and even dominance in this area through the adoption of appropriate legal and structural measures and the allocation of $280 billion for research and the creation of appropriate production. The European side is concerned not only that US firms will gain non-economic advantages that will allow them to overtake European competitors, but also that, in fact, European developers and manufacturers will not even be able to continue joint projects with Americans in this field. In other words, the future will be reserved for Americans.

The situation of European industry is aggravated by the high cost (compared to the US) of energy in Europe. And overseas partners have also had a hand in this. The US side believes it "saved Europe from Putin" by diversifying gas supplies to European countries. But having doubled this year's liquefied natural gas exports to the EU compared to 2021, the Americans were not ashamed to push the prices up - as a result, as Macron said recently, these prices do not look "friendly".

In any case, European businesses are seriously considering moving production overseas - where energy is cheaper and subsidies are available. According to authoritative German business surveys released this week, one in five big German businesses already has plans to relocate.

Not surprisingly, last week French President Macron met at the European Roundtable with the heads of a dozen major firms, from the auto giant BMW to the pharmaceutical company AstraZeneca PLC to the chemical companies Air Liquide SA and BASF. Macron urged them all not to transfer production.

EU helplessness

In Washington, the French president, as the EU representative, tried unsuccessfully to persuade the transatlantic partners to coordinate their new policy with the interests of the EU countries and not to kill the European industry. The joint communiqué from the meeting listed more than a dozen areas of successful cooperation between France and the US. It is noteworthy that there was no mention of high-profile disagreements - one gets the impression that Paris simply accepted its retreat even in scandalous moments (for example, the way the US recently crossed out all French ambitions in the Pacific Ocean by pushing to break the Franco-Australian agreements). As can be judged from the communiqué, Macron similarly backed down on the demands for Washington to correct the bills infringing on the interests of European industry - both countries only confirmed the unity of objectives to accelerate the transition to renewable energy sources and mentioned a US-EU task force that "will further strengthen the partnership". The same one that failed to resolve the issues earlier, which, in fact, made the French leader fly across the ocean!

Macron's loss was also evident in his conciliatory tone at the press conference after the meeting: "We need to synchronize again, and the discussion this morning was very clear." By comparison, when asked about excluding European partners from cooperation, Biden flatly refused to apologize for anything or acknowledge anything: "The United States makes no apology... We never had any intention of excluding people who work with us."

On Monday, December 5, a delegation of the European Union will go to Washington to formally discuss the infringement of European industry's interests with the American authorities. But it has no chance. The contradictions are unlikely to be resolved at all other than through EU capitulation.

The EU leaders want Biden to force the companies profiting from LNG supplies to the EU to lower their prices and also to correct the execution of the law on inflation reduction. But the US business will not cut gas prices; ideological reference to the principle of free trade and the "invisible hand of the market" will allow justifying this blatant profit; the price cap can be introduced only for Russian energy carriers. Biden can't repeal or fix the laws either - they are signed by him and approved by Congress, and it would be political suicide to take billions of dollars out of the hands of businesses right now.

Consequently, we are probably on the verge of a "trade war" between the EU and the US, in which the EU has practically no chance of getting the upper hand. The EU has been dodging this clash for a long time - the casus belli arose back in the summer with the adoption of the aforementioned laws. The confrontation between the "global West" and Russia forced the European countries of this "global West" to sweep this fundamental conflict under the rug.

But it is too serious and no compromise solution is in sight, so recently Paris and Berlin, as leading EU countries, tried to agree on reciprocal measures to protect EU industry, including granting tax benefits to European companies in case of further intransigence by American partners. There was talk of adopting a symbolic "Buy European Act". But the German leadership, where the Greens and the Free Democratic Party (supporters of the ideological course towards rapprochement with the US) are strengthening their positions - are not agreeing even to such a pragmatic act to protect their own economy. In the current situation, they want to do the opposite - to open up the EU even more through a new free trade agreement with the United States.

The issue in terms of surrender

However, the forces are not equal, and the European Union has little choice. It is weakened by the increasingly costly war in the east of the continent, and, as Hungarian Prime Minister Viktor Orban has said, it is proposed to finance it by taking new large loans from EU countries at their own expense and transferring them to Ukraine. The EU is also increasingly dependent on the United States even in the energy sector - getting off Putin's "gas needle" is accompanied by getting on another needle. Therefore, the question is not "who will win in this protectionist race" between Europe and America, but whether the EU will be able to achieve something more advantageous for itself than unconditional surrender in the face of Washington's economic pressure.

This is not a hypothetical scenario since it is not the first time Europeans have capitulated to Washington in recent times. It is worth recalling that a little more than a year ago, Washington, Canberra, and London simply broke the contracts concluded by Australia with French arms manufacturers for €56 billion! The contracts, by the way, were already being executed and could lead to a certain shift of strategic axes in the camp of the "global West". Of course, the US and its closest British allies could not allow this to happen. French Foreign Minister Jean-Yves Le Drian then called the incident a "stab in the back" and rebuked the Anglo-Saxons saying that "allies don't behave like that". Paris recalled its ambassador from the US for the first time in history. But realizing that there was nothing they could do, the French restrained their pride, with Biden's careless remark that they should have told Paris that we were tearing up their contracts. A week later the ambassador was returned to Washington and French-American relations continued.

The current European-American confrontation also has another aspect, which is repeated throughout recent history: every time a clash between Russia and any bloc of Western European countries ends in the weakening of both sides, with a parallel increase in power for the United States. The Pax Americana is only made possible by the current Ukrainian war.

Some Western European politicians understand this logic of mutual annihilation of Europe and Russia, and Macron insisted from the beginning of the Russian-Ukrainian war on the need to continue dialogue with the Kremlin, and recently asked the Pope to exert proper influence on Biden and Putin to "facilitate the peace process".

Destroying competitors under the pretext of "national security"?

Another rift within the Western bloc took place with regard to attitudes toward China. The US and Britain, accompanied by the Eastern European countries close to them, are demanding that China's freedom of action be restricted as much as possible wherever it can. New British prime minister, Rishi Sunak, presented his vision of foreign policy and, speaking of Russia and China, demanded "to confront our rivals not with rhetoric but with firm pragmatism." To be more precise: "Our approach to China must change. Let's be frank: the so-called golden age is over and with it the naïve idea that trade can lead to social and political reform". The UK, under the previous government, harshly pushed back a number of Chinese firms, including Huawei. All of these measures were justified through an expansive interpretation of the concept of national security.

The US is following a similar path of shifting consideration of certain issues into the realm of national security (securitization). The US Federal Communications Commission, again citing national security concerns, banned the supply of telecommunications equipment and video surveillance products made by leading Chinese companies (Huawei, ZTE, etc.) to the country on November 25.

Against this backdrop, the "Old Europe" of Western and Southern European countries is in no hurry to shoot itself in the other foot by refusing to work with the world's largest power after breaking off cooperation with Russia. It is symbolic that simultaneously with the growing discussion of an impending trade war between the US and the EU, European Council President Charles Michel paid a visit to Beijing on January 1 to discuss cooperation between European countries and China - contrary to Washington's warnings.

More recently, EU High Representative for Foreign Affairs and Security Policy Josep Borrell spoke out in an interview with Politico against the US policy of involving Western allies in a collective containment of China in the Indo-Pacific region. He recalled, "NATO was not built for operations in the Pacific. Don't you think we have enough threats and challenges in the traditional NATO scenario as it is?" Of course, at the NATO summit in Madrid in June, its countries approved a new strategy in which they characterized China as a "systemic challenge" for the first time, but the European establishment clearly did not like this innovation.

Therefore, European attempts to maintain relations with the PRC continued after that. In early November, German Chancellor Olaf Scholz visited Beijing with a delegation of representatives of leading German companies - Siemens, Adidas, Deutsche Bank, BASF, BioNTech, BMW, and Volkswagen. As a result of the talks, the Chinese company CASC signed a contract with Airbus Concern on the purchase of 140 airliners worth $17 billion. Macron himself is going to visit Beijing at the beginning of the new year.

Practical conclusions for Azerbaijan's foreign policy

We have considered here only two deep splits in the Western bloc, although there are undoubtedly more - the leading Western media are not inclined to talk about many of them these days, as they themselves have taken seats in the trenches of confrontation, forgetting all the beautiful stories about an independent objective press. But the two cases already considered allow us to draw several conclusions from the perspective of the survival and development of third states, including Azerbaijan.

Firstly, the "collective West" is not so collective. There are many splits in it, and the US is increasingly inclined to solve the issues it needs without the rest of the "collective".

Second, the current processes associated with the mutual weakening of Russia and the EU will inevitably lead to an increase in American dominance in relative terms. But not in absolute terms. As a result, the world is experiencing what the prominent American publicist Fareed Zakaria called "the rise of the rest" back in the 2000s. Therefore, Washington and its close allies, being worried about competition from China, and not only China, are abandoning even their fundamental belief in the market economy, open society, and similar dogmas of Western liberal democracy. Command-and-control prohibition with reference to "national security" considerations is becoming a trend. This is not a sign of strength, but rather a gesture of desperation.

Third, given the current "fragmentation of the West" (Macron's expression) and the "rise of the rest", non-Western states, including Azerbaijan, have more opportunities to assert their just demands even in confrontation with key Western states. This is possible because even within the "global West" and its various structures (NATO, EU, etc.) the political struggle continues in accordance with the logic of modern imperialism. Türkiye, for example, successfully uses this aspect of Western policy. Russia, on the contrary, insisted on the mythical monolithic nature of Western structures and some kind of fatality of this or that country joining NATO-EU, and therefore, for example, on the eve of the war wanted to talk even about European security with the USA as they say, the only relevant actor. The difference in the results is obvious.

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