ReportWire

Tag: Trade Defense

  • The US wants Europe to buy American weapons; the EU has other ideas

    The US wants Europe to buy American weapons; the EU has other ideas

    [ad_1]

    Press play to listen to this article

    Voiced by artificial intelligence.

    This article is part of the Europe’s strategic impotence Special Report.

    At NATO summit after NATO summit, European leaders get a clear public message from Washington — increase spending on defense.

    In private, there’s another message that’s just as clear — make sure a lot of that extra spending goes on U.S. weapons.

    European leaders are resisting.

    “We must develop a genuinely European defense technological and industrial base in all interested countries, and deploy fully sovereign equipment at European level,” French President Emmanuel Macron said at the GLOBSEC conference in Bratislava last month.

    The decades of cajoling from Washington are paying off. Although most EU countries aren’t yet meeting NATO’s target of spending 2 percent of GDP on defense, the alliance has seen eight years of steady spending increases. In 2022, spending by European countries was up by 13 percent to $345 billion — almost a third higher than a decade ago — much of it a reaction to Russia’s full-scale invasion of Ukraine.

    Now the question is how that money will be spent.

    The U.S. wants to ensure that European countries — which already spend about half of their defense purchasing on American kit — don’t make a radical switch to spending more of that money at home. 

    Some European leaders are hoping that’s exactly what happens, but it’s an open question whether the Continent’s defense industry can make that happen. 

    “Traditionally, there was a suspicion about a change in Europe’s defense capabilities which dates back more than 25 years,” said Max Bergmann, director of the Europe, Russia, Eurasia Program at the Washington-based Center for Strategic and International Studies. “What direction would the EU go, would it mean the EU would decouple from NATO, what would the impact be on U.S. defense industrial policy?” 

    Buying at home

    The current tensions in Brussels are over whether new EU-wide defense policy should be limited to EU companies — a position driven by Macron and Internal Market Commissioner Thierry Breton, a Frenchman. That confirms suspicions stateside about European protectionism when it comes to allowing U.S. companies to compete for EU contracts. 

    “Our plan is to directly support, with EU money, the effort to ramp up our defense industry, and this for Ukraine and for our own security,” Breton said last month. 

    Internal Market Commissioner Thierry Breton wants new EU-wide defense policy to be limited to EU companies | Olivier Hoslet/AFP via Getty Images

    But there’s an uncomfortable fact for the backers of European strategic autonomy: When it comes to arms, Europe still depends on the U.S. 

    While European companies have deep expertise in defense — building everything from France’s Rafale fighter to Germany’s Leopard tank and Poland’s man-portable Piorun air-defense system — the scale of the U.S. arms industry, as well as its technological innovation, makes it attractive for European weapons buyers. 

    The most common big-ticket item is Lockheed Martin’s F-35 Joint Strike Fighter, at a cost of $80 million a pop. There is also an immediate surge in demand for off-the-shelf items like shoulder-fired missiles and artillery shells.

    “Following Russia’s invasion of Ukraine, European states want to import more arms, faster,” said a report by the Stockholm International Peace Research Institute (SIPRI).

    Buying abroad

    The war in Ukraine has underscored the dominance of the U.S. defense industry. 

    A host of European countries are buying Javelin anti-tank missiles produced by Raytheon and Lockheed Martin; Poland this year signed a $1.4 billion deal to buy 116 M1A1 Abrams tanks, as well as another $10 billion agreement to buy High Mobility Artillery Rocket Systems produced by Lockheed Martin; Slovakia is buying F-16 fighters, while Romania is in talks to buy F-35s.

    Those deals are raising fears in Europe over whether they can wean themselves off of U.S. defense suppliers. In one example, France and Germany worry about Spain’s intentions as it kicks the tires on F-35s while also being a partner in developing the European Future Combat Air System jet fighter.

    But the need to restock weapons depots and continue shipping materiel to Ukraine is urgent, and after decades of contraction, the Continent’s defense industry is having a difficult time adjusting.

    “Our European allies and partners, they’ve never experienced anything like this,” said a senior U.S. Defense Department official, referring to the spasm of spending brought on by Russia’s invasion. The official was granted anonymity to discuss the situation. “They don’t yet have the defense production authorities they need [to move quickly] and they’ve really been looking to us to try to get a handle on how they can increase production, and I think they’re learning a lot from us.” 

    To help Europe get there, the United States has expanded the number of bilateral security supply arrangements it has with foreign partners since the Russian invasion, signing new agreements with Latvia, Denmark, Japan and Israel since October. These allow countries to more quickly and easily sell and trade defense-related goods and services. 

    The Biden administration also signed an administrative arrangement with the European Union in late April to establish working groups on supply-chain issues, while giving both sides a seat at the table in internal meetings at the European Defence Agency and the Pentagon. 

    But there are limits to how far and how fast both sides are able and willing to go. 

    In the near term, capacity issues and political will means the rhetorical sea change in EU military spending is unlikely to make a huge dent in U.S. military industrial policy. 

    While the past 18 months have seen a huge spike in defense budgets — Germany announced a  special debt-financed fund worth €100 billion after the Russian invasion of Ukraine; Poland’s defense expenditure is set to reach 4 percent of GDP this year — EU-wide projects are facing significant headwinds. European companies say they need longer lead times and long-term contracts to make needed investments. 

    “You need that visibility and certainty to make those investments. We’re in a chicken game between governments and industry — who are the first ones that are putting the money on the table,” said Lucie Béraud-Sudreau, director of the military expenditure and arms production program at SIPRI. 

    Ultimately, the global defense boom means that there should be plenty of military spending to go around, at least in the short term as countries rush to prove their worth to their NATO and EU allies and the Russian threat remains acute.

    Paul McLeary reported from Washington and Suzanne Lynch from Brussels.

    [ad_2]

    Paul McLeary and Suzanne Lynch

    Source link

  • American takeover of French nuclear firm raises concerns in Paris

    American takeover of French nuclear firm raises concerns in Paris

    [ad_1]

    Press play to listen to this article

    Voiced by artificial intelligence.

    PARIS — France’s feisty Economy Minister Bruno Le Maire has another opportunity to pick a fight with Washington as a sensitive investment screening case is about to land on his desk.

    The French government wants to prevent nuclear-submarine parts supplier Segault from falling into American hands just as France and the U.S. are experiencing new tensions over the Inflation Reduction Act, a $369 billion package of green subsidies and tax breaks that Paris and Brussels slammed as a protectionist move in breach of global trade rules.

    The two countries have seen an ebb and flow in tensions in recent years that reached worrying levels back in 2021, when the U.S. infuriated France by snatching away a multibillion-euro submarine contract Paris had signed with Canberra. 

    Now, the American takeover of the small France-based company with less than 100 employees, which was virtually unknown to most French people until a few weeks ago, is turning into a test of France’s industrial sovereignty ambitions.

    Segault’s current owner, Canada’s industrial valves group Velan, is being bought by American industrial machinery giant Flowserve in a takeover deal announced earlier this year. Segault supplies components for nuclear-propelled submarines built by state-owned shipbuilder Naval Group and also makes industrial valves that are used on France’s flagship Charles de Gaulle aircraft carrier. If the deal goes through, Segault would become American-controlled, raising concerns in Paris’ halls of power that Washington would then have access to strategic French technology. 

    The deal has become a hot political issue in recent weeks, with right-wing MPs urging Le Maire to block the American buyer, and with a surprise left-wing candidate emerging as a bidder.

    The government is currently “looking for a French buyer,” according to a spokesperson for France’s defense ministry, who declined to comment on offers received so far, noting that the French economy ministry has the final word on it.

    Under French law, the economy ministry must be informed of the takeover of companies in strategic sectors in order to green-light or veto deals. The government confirmed that Segault’s takeover falls within the scope of France’s investment screening powers and will be examined as soon as it is officially notified to French authorities.

    Investment screening decisions are first assessed at the technical level within France’s powerful economy ministry, known as Bercy, but they also have a political dimension as they are ultimately taken by the economy minister himself via a decree. In the past, Le Maire has not hesitated to use his veto powers for politically sensitive cases, turning investment screening cases into political battles. In a bid to cast himself as a defender of French industrial jewels, Le Maire widened the scope of investment screening powers in 2019, during his first term.

    As in many other EU countries, the scope of France’s veto powers was further extended during the coronavirus pandemic, to prevent the risk that companies weakened by the crisis could be bought by foreign investors. Those new powers, which were meant to be temporary, have been repeatedly extended amid the economic crisis linked to Russia’s full-scale invasion of Ukraine.

    The Segault case is also seen as an opportunity for Paris to show its muscle.

    For socialist Michel Sapin, who served several times as France’s finance and economy minister, the deal gives the government an opportunity to present itself as a defender of national gems by taking “a braggart position on re-industrialization and industrial sovereignty” that, according to him, has not been backed up by action so far. 

    MEP Marie-Pierre Vedrenne noted that France’s investment screening won’t discriminate against U.S. buyers | Alexis Haulot/European Parliament

    “We can’t deny that we have some irritants with Americans, especially the IRA in this phase,” said Macron’s ally Marie-Pierre Vedrenne, vice chair of the European Parliament’s trade committee, while noting that France’s investment screening won’t discriminate against U.S. buyers. 

    But Macron’s allies were also quick to insist that Paris’ efforts to take Segault away from its American buyer was not a protectionist attempt to block a U.S. investment.

    “The criteria won’t be friendship or mistrust toward Washington,” said a French minister, who was not authorized to speak publicly on the matter, adding that “the context” should not prevent Paris from “controlling some sovereignty aspects” of the deal.  

    For Vedrenne, Macron’s ally in the European Parliament, “the Americans are first of all in a mindset of prior defense of their interests and we see it with this case … sovereignty is at stake so we have to be vigilant whatever the nationality [of the buyer] is, even if it is an ally, because the defense of the French interests must be examined above all.”

    Despite some displays of friendship, tensions between Paris and Washington have risen at a steady pace over recent months and increased after French President Emmanuel Macron told POLITICO that Europe should not be “America’s followers” when it comes to China policy. 

    Le Maire has also been particularly harsh with the U.S., accusing Washington of using Russia’s war in Ukraine to establish “economic domination” and of breaching WTO rules with its massive subsidy package, the Inflation Reduction Act. Earlier this month, he said that Europe should, much like the the U.S. and China, put first its own industrial interests and stop obeying the free-trade dogma. 

    Earlier in the month, as he visited Washington, he accused “some” in the U.S. of applying double standards when it comes to trade with China. “I see that the volume of trade between China and the United States has never been so high … we are asking Europe to give up trade that has increased between the United States and China. We don’t want to be the village idiots, who get screwed and let other powers trade with China while we would no longer have the right to do so,” the minister said.

    Should France decide to veto the deal, Segault could be carved out from Flowserve’s acquisition of Velan. However it is unclear whether the American buyer would still be interested in buying Velan without Segault.

    Le Maire’s quest for a French buyer might be a tough mission to accomplish.

    Another former economy minister and “Made in France” champion, socialist Arnaud Montebourg urged Le Maire to block the deal earlier this month and offered to buy Segault together with the help of Pierre-Edouard Stérin, a businessman who in the past has been close to far-right former presidential candidate Eric Zemmour.

    A person with direct knowledge of the file but who was not authorized to speak publicly said that it is unlikely Le Maire would back Montebourg’s offer.

    Elisa Braun contributed reporting.

    [ad_2]

    Giorgio Leali

    Source link

  • France plays bad cop as transatlantic trade tensions ramp up

    France plays bad cop as transatlantic trade tensions ramp up

    [ad_1]

    Press play to listen to this article

    PARIS — U.S. President Joe Biden needs to watch out; France is resuming its traditional role as Europe’s troublemaker on the transatlantic trade front.

    It had seemed like the bad blood between Brussels and Washington was easing on Biden’s watch. Facing a common foe in China, the EU and the U.S. last year struck a truce on the tariffs that former President Donald Trump slapped on European steel and aluminium. Over this year, Russia’s war against Ukraine has meant that America and Europe needed to present a united front, at least politically.

    Cracks are now starting to re-emerge, however. The EU is furious that the U.S. is pouring subsidies into the homegrown electric car industry. Accusing Washington of protectionism, Europe is now threatening to draw up its own defenses.

    Unsurprisingly, French President Emmanuel Macron is leading the charge. “The Americans are buying American and pursuing a very aggressive strategy of state aid. The Chinese are closing their market. We cannot be the only area, the most virtuous in terms of climate, which considers that there is no European preference,” Macron told French daily Les Echos.

    Upping the ante, he called on Brussels to support consumers and companies that buy electric cars produced in the EU, instead of ones from outside the bloc. 

    There are good reasons why the Europeans are fretting about their trade balances.

    The war has delivered a huge terms-of-trade shock, with spiraling energy costs hauling the EU into a yawning bloc-wide trade deficit of €65 billion in August, from only €7 billion a year earlier. In one manifestation of those strains, Europe’s growing reliance on American liquefied natural gas to substitute for lost Russian supplies has re-ignited tensions.

    Macron’s comments are a reflection of EU consternation over Washington’s Inflation Reduction Act, which incentivizes U.S. consumers to “Buy American” when purchasing a greener car. The EU argues that requiring that car needs to be assembled in North America and contain a battery with a certain percentage of local content discriminate against the EU and other trade partners.

    The European Commission hopes to convince Washington to find a diplomatic compromise for European carmakers and their suppliers. If not, that leaves the EU no choice but to challenge Washington at the World Trade Organization, EU officials and diplomats told POLITICO — even if a new transatlantic trade war is the last thing both sides want to spend their time and money on.

    Macron’s comments “are clearly a response against the Inflation Reduction Act,” noted Elvire Fabry, a trade policy expert at the Institut Jacques Delors in Paris. “Macron plays the role of the bad cop, compared to the European Commission, which left Washington some political room to make adjustments,” she noted. 

    ‘American domination’

    The Commission hopes to find a diplomatic compromise with the U.S. for European carmakers and their suppliers | Ludovic Marin/AFP via Getty Images

    France has traditionally been the bloc’s most outspoken country when it came to confronting Washington on a wide range of trade files. Paris, for instance, played a key role in killing a transatlantic trade agreement between the EU and U.S. (the so-called “TTIP”). Its digital tax angered U.S. Big Tech and triggered a trade war with the Trump administration.

    More recently, during its rotating Council of the EU presidency, Paris focused on trade defense measures, which will give Brussels the power to retaliate against unilateral trade measures, including from the U.S.

    New tensions are bad news for the upcoming meeting of the Trade and Tech Council early December, which so far has had trouble to show that it’s more than a glorified talking shop. 

    France won’t be left alone in a possible trade war on electric cars. According to Fabry, these tensions will bring Paris and Berlin closer, as the German car industry is also particularly affected by the U.S. measures.

    But the “Buy American” approach is not the only bone of contention. The fact that Europe is increasingly relying on gas imports from the U.S. brought European discontent to the next level.

    Although gas import prices fell in September from their all-time highs in August, they were still more than 2.5 times higher than they were a year ago. And, taking into account increased purchase volumes, France’s bill for imports of LNG multiplied more than tenfold in August, year on year, by one estimate.

    Economy and Finance Minister Bruno Le Maire last week warned that Russia’s war against Ukraine should not result in “American economic domination and a weakening of Europe.” Le Maire criticized the U.S. for selling LNG to Europe “at four times the price at which it sells it to its own companies,” and called on Brussels to take action for a “more balanced economic relationship” between the two continents.

    That very same concern is shared by some Commission officials, POLITICO has learned, but also among French industrialists.

    It is “hardly contestable” that the U.S. had some economic benefits from the war in Ukraine and suffered less than Europe from its economic consequences, said Bernard Spitz, head of international and European affairs at France’s business lobby Medef. 

    This article is part of POLITICO Pro

    The one-stop-shop solution for policy professionals fusing the depth of POLITICO journalism with the power of technology

    Exclusive, breaking scoops and insights

    Customized policy intelligence platform

    A high-level public affairs network

    [ad_2]

    Giorgio Leali and Barbara Moens

    Source link