When the EU and Canada meet for talks this week, their encounter will be calm, pleasant and even, in the words of one EU diplomat, “just plain boring.” But both sides will be contending with a looming problem — Donald J. Trump.
The prospect of another Trump presidency in the U.S. is spooking both Brussels and Ottawa as leaders plan to meet in St. John’s, a remote Canadian harbor city symbolic of their bilateral relationship: historically rooted, pleasant and friendly.
The U.S. is key to the economies of both sides. As the EU, especially, struggles to cope with the trade legacy of the previous Trump term, the unpredictability of another Trump presidency is sending shivers through Brussels. POLITICO spoke to several officials briefed on the summit who said next year’s U.S. elections will overshadow the talks.
After the recent visit of EU leaders to the White House, the bloc’s relationship with the U.S. will be discussed with Canadian Prime Minister Justin Trudeau, according to officials briefed on the summit. Another four years of antagonism under a Trump White House would be a grave blow to the EU and Canada; both also fear that U.S. military and financial support for Ukraine will disintegrate with a Trump presidency.
For now, the talks should provide the participants with a breakafter weeks of navigating both the war in Ukraine and the Israel-Hamas war.
European Council President Charles Michel met Ukrainian President Volodymyr Zelenskyy in Kyiv earlier this week, while Commission President Ursula von der Leyen has travelled to the Middle East following initial criticism of her response to the war between Israel and Hamas — geopolitical challenges on which the EU and Canada are cooperating at “unrivaled historic levels,” according to an EU official. In early December, both European leaders are set to travel to Beijing for their EU-China summit, from which they risk returning empty-handed.
Meanwhile, Canadian Prime Minister Justin Trudeau’s approval ratings have been in free-fall since the summer. Court rulings and the politics of affordability have dented his record on the climate, casting uncertainty on timelines for major projects. Fallout from the Israel-Hamas war has also hurt morale within his Liberal Party.
In St. John’s, at least, leaders will be able to reaffirm their bilateral relationship and underscore their “shared commitment to democratic values, multilateralism and the international rules-based order,” which elsewhere are falling apart. The two sides are set to double down on their bilateral commitments in new policy fields with an “impressive list of deliverables,” according to the EU official, including a green alliance, more cooperation on raw materials, and a digital partnership.
Another EU diplomat said that while there are no mutual irritants, “a few irritants could be a welcome challenge to dynamize the relationship.”
But while the EU remains on a good footing with Canada, it has struggled with the current U.S. administration of President Joe Biden, most notably with Washington’s Inflation Reduction Act, which will also be discussed on the sidelines of the St. John’s summit. The EU had worried that the $369 billion IRA would hollow out the bloc’s economy as firms decamped across the Atlantic to take advantage of its massive subsidies. Brussels and Washington continue to negotiate a high-stakes agreement on critical minerals to allow electric vehicle batteries made by European companies to qualify for the IRA’s consumer tax credits.
EU Ambassador to Canada Melita Gabrič told POLITICO that Ottawa’s relationship with the bloc is “closer than it has ever been.” She declined, however, to say if she saw Trump’s potential return as a catalyst for even closer ties in the year ahead.
“We will see what happens, but certainly we put a premium on our transatlantic relations,” she said, referring to both the U.S. and Canada.
Barbara Moens reported from Brussels. Zi-Ann Lum reported from Ottawa. Camille Gijs contributed reporting from Brussels.
Stop driving Europe away from the United States, dismayed central and eastern European officials fumed on Tuesday as French President Emmanuel Macron’s comments continued to ripple across the Continent.
Macron jolted allies in the EU’s eastern half after a visit to China last week when he cautioned the Continent against getting pulled into a U.S.-China dispute over Taiwan, the self-ruled island Beijing claims as its own, imploring his neighbors to avoid becoming Washington and Beijing’s “vassals.”
The comments rattled those near the EU’s eastern edge, who have historically favored closer ties with the Americans — especially on defense — and pushed for a hasher approach to Beijing.
“Instead of building strategic autonomy from the United States, I propose a strategic partnership with the United States,” Polish Prime Minister Mateusz Morawiecki said Tuesday before flying off to the U.S., of all places, for a three-day visit.
Privately, diplomats were even franker.
“We cannot understand [Macron’s] position on transatlantic relations during these very challenging times,” said one diplomat from an Eastern European country, who, like others, spoke on the condition of anonymity to freely express themselves. “We, as the EU, should be united. Unfortunately, this visit and French remarks following it are not helpful.”
The reactions reflect the long-simmering divisions within Europe over how to best defend itself. Macron has long argued for Europe to become more autonomous economically and militarily — a push many in Central and Eastern Europe fear could alienate a valuable U.S. helping keep Russia at bay, even if they support boosting the EU’s ability to act independently.
“In the current world of geopolitical shifts, and especially in the face of Russia’s war against Ukraine, it is obvious that democracies have to work closer together than ever before,” said another senior diplomat from Eastern Europe. “We should be all reminded of the wisdom of the first U.S ambassador to France Benjamin Franklin who rightly remarked that either we stick together or we will be hanged separately.”
Macron, a third senior diplomat from the same region huffed, was freelancing yet again: “It is not the first time that Macron has expressed views that are his own and do not represent the EU’s position.”
Walking into controversy
In his interview, Macron touched on a tense subject within Europe: how it should balance itself against the superpower fight between the U.S. and China.
The French president encouraged Europe to chart its own course, cautioning that Europe faces a “great risk” if it “gets caught up in crises that are not ours, which prevents it from building its strategic autonomy.”
Macron said he wants Europe to become a “third pole” to counterbalance China and the U.S. in the long term | Pool photo by Jacques Witt/AFP via Getty Images
It’s a stance that has many adherents within Europe — and has even worked its way into official EU policy as officials work to slowly ensure the Continent’s supply lines aren’t fully yoked to China and others on everything from weapons to electric vehicles.
Macron said he wants Europe to become a “third pole” to counterbalance China and the U.S. in the long term. An imminent conflict between Being and Washington, he argued, would put that goal at risk.
Yet out east, officials lamented that the French leader was simply treating the U.S. and China as if they were essentially the same in a global power play.
The comments, the second diplomat said, were “both ill-timed and inappropriate to put both the United States and China on a par and suggest that the EU should keep strategic distance to both of them.”
A Central European diplomat flatly dismissed Macron’s stance as “pretty outrageous,” while another official from the same region chalked it up to an attempt “to distract from other problems and show that France is bigger than what it is” — a reference to the protests roiling France amid Macron’s pension reforms.
The frustration in Central and Eastern Europe stems in part from a feeling that the French president has never made clear who would replace Washington in Europe — especially if Russia expands its war beyond Ukraine, said Kristi Raik, head of the foreign policy program at the International Centre for Defence and Security, a think tank in Estonia, a country of about 1.3 million people that borders Russia.
It’s an emotional point for Europe’s eastern half, where memories of the Soviet era linger.
“We hear Macron talking about European strategic autonomy, and somehow just being completely silent about the issue, which has become so clear in Ukraine, that actually European security and defense depends very strongly on the U.S.,” Raik said.
Raik noted, of course, that European countries, most notably Germany, are scrambling to update their militaries. France has also pledged large increases in its defense budgets.
But these changes, she cautioned, will take a “very long time.”
If Macron “wants to be serious in showing that he really aims at a Europe that is capable of defending itself,” Raik argued, “he also should be showing that France is willing to do much more to defend Europe vis-à-vis Russia.”
BRUSSELS — European Commission President Ursula von der Leyen will travel to Washington next week, with China’s potential supply of weapons to Russia expected to be high on the agenda of a meeting with U.S. President Joe Biden.
Her trip next Friday, confirmed by the White House, comes as EU officials are taking a wait-and-see approach to Washington’s claim that Beijing is considering providing Moscow with weapons. In a White House statement, Press Secretary Karine Jean-Pierre said Biden will discuss “our work together to address the challenges posed by the People’s Republic of China” with von der Leyen.
U.S. officials are reportedly seeking to call on close allies to impose unprecedented sanctions on China, if Beijing provides military support to Russia for its war against Ukraine.
On Thursday, top Brussels-based diplomats from Ukraine, the U.S., Canada, Poland, the Baltic states, Japan and South Korea gathered for a lunch meeting. A spokesman for the Polish permanent representation to the EU, which organized the lunch, refused to disclose details of the discussion but said that the meeting was aimed at showing support for Ukraine.
A senior diplomat, speaking on condition of anonymity, said at least one representative at the meeting said the EU should not act without proof of Chinese delivery of weapons to Russia. “Clearly a red line is crossed” if there is such proof, the diplomat added.
Another EU official, who was not at the gathering, said that the U.S. has fallen short of presenting evidence of China planning to provide weapons.
“There is a lot of talk out there … that China may be beginning to consider to deliver lethal weapons ammunition. We have not seen on our side, any concrete evidence of that so far,” the official said. “And I think if you look at the messaging from our U.S. friends, you’re seeing even slightly contradictory messaging at times, Biden was much softer … than others have been.”
In remarks aired on ABC News on Friday, Biden said: “I don’t anticipate — we haven’t seen it yet — but I don’t anticipate a major initiative on the part of China providing weaponry to Russia.”
That came after U.S. Secretary of State Antony Blinken said Chinese firms were already providing “non-lethal support” to Russia, with new information suggesting that Beijing could provide “lethal support.”
National Security Council spokesperson John Kirby said in a press briefing Thursday that “there are tools available to not only the United States but to our allies and partners,” should China make moves to send weapons to Russia.
China’s Foreign Ministry has criticized Washington for “slandering” the country and questioning the U.S. sale of weapons to Taiwan while also supplying military support to Ukraine.
In Europe, officials have stepped up warnings targeted at Beijing. Addressing China in front of German lawmakers, Chancellor Olaf Scholz said on Thursday: “Do not supply weapons to the aggressor Russia.”
Earlier in the day, Dutch Foreign Minister Wopke Hoekstra said helping Moscow militarily “will have consequences if countries crossed that line.”
“What I will convey to each of the colleagues, including my Chinese colleagues here, is that the truth here is not somewhere in the middle. There is only one country responsible and that is Russia,” Hoekstra added.
As well as China, talks on the Inflation Reduction Act and broader security issues are expected to be discussed during von der Leyen’s White House visit.
Europe and the U.S. have been at odds for months over Washington’s landmark green subsidies plan, which Brussels fears will drain the continent of investment and green technology.
Before Washington, von der Leyen will travel to Canada to meet Prime Minister Justin Trudeau.
Von der Leyen and Trudeau are expected to discuss the supply of raw materials, as the European Commission prepares to unveil its Critical Raw Materials Act this month. Another hot potato is trade, since the EU-Canada trade deal has still to be ratified by a number of EU countries, although significantly Germany gave it the green light in December.
BERLIN — The saga of the Chinese spy balloon has plunged relations between Washington and Beijing into fresh crisis. For European governments, that spells all kinds of trouble.
With relations worsening between the two superpowers, EU leaders seem likely to come under intensifying pressure from the White House to pick sides and join forces against China, just as they were hoping for a thaw in tricky relations with Beijing.
And then there’s the war.
Russia is preparing a major offensive in Ukraine over the next few weeks but EU diplomats fear the balloon incident risks distracting President Joe Biden’s team at exactly the moment when American support for Kyiv will be needed most.
“We never expected 2023 to be easy, but this is off to a really tough start,” one European diplomat said.
On Saturday, the U.S. shot down what it identified as a Chinese surveillance balloon off the coast of South Carolina with an air-to-air missile from an F-22 stealth fighter jet.
Secretary of State Antony Blinken indefinitely postponed a visit to Beijing that had been scheduled for this week, the first such trip planned for a U.S. cabinet-level official under Biden’s presidency.
Images of the incident have circulated in dramatic video footage on social media, taken mostly by excited onlookers cheering the theatrical show of military might.
Beijing insists the giant solar panel-powered object was a “civilian airship” that went off course while conducting “mainly meteorological” research. In response to the missile strike, the Chinese government expressed “strong dissatisfaction” and protested against the use of force by the U.S. to attack the unmanned, civilian craft. It added that it would “reserve the right to take further necessary responses.”
U.S. foreign policy, while still heavily invested in supporting Ukraine militarily, may be distracted by the sharpening clashes with Beijing. Right-wing U.S. politicians have been calling for more attention on China since Russia invaded Ukraine a year ago.
As the “U.S.-China rivalry sharpens, there will be more pressure on Europeans, whose approach to China is very diverse, to pick sides,” said Ricardo Borges de Castro, head of the Europe in the World Program at the European Policy Centre, a Brussels-based think tank. “The reality is, if the world becomes increasingly dominated by two poles — U.S. and China — the EU and Europeans will need to pick sides for as long as Europe’s security and defense depends on the U.S. umbrella.”
Russia, in the meantime, is expected to launch massive offensives in just a few weeks, when the harshest winter season comes to an end, according to Ukrainian officials.
A plane flies past the Chinese spy balloon (top right) | Nell Redmond/EPA
“Washington will be busy with Beijing for some time now,” a senior EU diplomat said on Sunday. “It’s not goodnews for the EU because Russia is still the main concern.”
Bad timing
For Europe, the incident also comes at an inconvenient moment as senior officials have been preparing to re-engage with Beijing.
The EU’s foreign policy chief, Josep Borrell, is understood to be making plans for a trip to Beijing in April, when he would also be expected to travel to Japan for a G7 ministerial meeting. Separately, French President Emmanuel Macron has also announced his intention to meet President Xi Jinping in the Chinese capital early this year; he would be interested in taking a top official from the European Commission to join him, according to an official with knowledge of the plans.
The latest U.S.-China flare-up “means that we would now have to be watching how badly China reacts, and whether these [planned] trips will be treated as a propaganda success by Beijing in splitting up the transatlantic ties,” a diplomat said on condition of anonymity as he was not authorized to speak on this subject.
“In the wake of the Ukraine war, the China policy coordination between both sides of the [the Atlantic is] losing steam,” said Reinhard Bütikofer, chair of the European Parliament’s delegation on relations with China. “While Washington D.C. enhances pressure against Beijing particularly on the technological front and in the Taiwan context, Brussels, Berlin and Paris show new hesitancy.”
Further complicating matters is Beijing’s apparent lack of interest in helping the West put pressure on Vladimir Putin to end the war in Ukraine.
Worse, according to a report in the Wall Street Journal, China has emerged as the dominant supplier of dual-use goods to Russia, providing technology that Moscow’s military needs to prosecute its invasion. Chinese state-owned defense companies have shipped navigation equipment, jamming technology and fighter-jet parts to sanctioned Russian government-owned defense companies, according to the article.
European leaders have repeatedly warned Beijing not to aid Moscow militarily.
China’s top foreign policy official, Wang Yi, has dropped a plan to visit Brussels even though he would be traveling to Germany for the Munich Security Conference in February, two diplomats told POLITICO.
Europe’s reaction to the balloon incident was muted. The EU merely noted the U.S.’s right to defend its airspace. “Safety and protection of airspace is an issue of national security and therefore a competence, responsibility and prerogative” of the specific state or states involved, an EU spokesperson said on Sunday.
China’s Vice Foreign Minister Ma Zhaoxu visited Moscow last week to reassure his Russian counterparts | Johannes Eisele/ AFP via Getty Images
Few European countries supported the Biden administration’s decision in public, highlighting a general sense of reluctance to aggravate Beijing. One of the exceptions was Estonia, where Foreign Minister Urmas Reinsalu, retweeting a BBC report about the balloon’s downing, said: “I support USA operation to defend its sovereignty. I fully condemn provocations jeopardising USA national security.”
Other U.S. allies did not hold back. Canadian Prime Minister Justin Trudeau praised the operation, tweeting “Canada strongly supports this action — we’ll keep working together … on our security and defense.”
South Korea’s Foreign Minister Park Jin, during a visit to Washington, said “I sufficiently understand the decision to postpone Secretary [Blinken]’s visit to China and I think that China should make a swift and very sincere explanation about what happened.”
Tom Tugendhat, U.K. security minister and a long-time skeptic of Beijing, called for concern over other forms of Chinese threats. “Worried about being spied on from the sky? Look at what some apps are collecting on your phone and consider your cyber security. Some risks are much closer to home,” he tweeted.
EU foreign policy in 2023 may be defined by which of these expires first: European indecision over China, or America’s appetite for providing Europe’s defense.
BERLIN — News this month that the number of German soldiers declaring themselves conscientious objectors rose fivefold in the wake of Russia’s full-scale invasion of Ukraine created little more than a ripple in Germany.
For many Germans it’s perfectly natural for members of the Bundeswehr, the army, to renege on the pledge they made to defend their country; if Germans themselves don’t want to fight, why should their troops?
Indeed, in Germany, a soldier isn’t a soldier but a “citizen in uniform.” It’s an apposite euphemism for a populace that has lived comfortably under the U.S. security umbrella for more than seven decades and goes a long way toward explaining how Germany became NATO’s problem child since the war in Ukraine began, delaying and frustrating the Western effort to get Ukraine the weaponry it needs to defend itself against an unprovoked Russian onslaught.
The latest installment in this saga (it began just hours after the February invasion when Germany’s finance minister told Ukraine’s ambassador there was no point in sending aid because his country would only survive for a few hours anyway) concerns the question of delivering main battle tanks to Ukraine. Germany, one of the largest producers of such tanks alongside the U.S., has steadfastly refused to do so for months, arguing that providing Ukraine with Western tanks could trigger a broader war.
Chancellor Olaf Scholz has also tried to hide behind the U.S., noting that Washington has also not sent any tanks. (Scholz has conveniently ignored the detail that the U.S. has provided Ukraine with $25 billion in military aid so far, more than 10 times what Germany has.)
Germany’s allies, including Washington, often ascribe German recalcitrance to a knee-jerk pacifism born of the lessons learned from its “dark past.”
In other words, the German strategy — do nothing, blame the Nazis — is working.
Of course, Germany’s conscience doesn’t really drive its foreign policy, its corporations do. While it hangs back from supporting Ukraine in a fight to defend its democracy from invasion by a tyrant, it has no qualms about selling to authoritarian regimes, like those in the Middle East, where it does brisk business selling weapons to countries such as Egypt and Qatar.
Despite everything that’s happened over the past year, Berlin is still holding out hope that Ukraine can somehow patch things up with Russia so that Germany can resume business as usual and switch the gas back on. Even if Germany ends up sending tanks to Ukraine — as many now anticipate — it will deliver as few as it can get away with and only after exhausting every possible option to delay.
Much attention in recent years has focused on Nord Stream 2, the ill-fated Russo-German natural gas project. Yet tensions between the U.S. and Germany over the latter’s entanglement with Russian energy interests date back to the late 1950s, when it first began supplying the Soviet Union with large-diameter piping.
Throughout the Cold War, Germany’s involvement with NATO was driven by a strategy to take advantage of the protection the alliance afforded, delivering no more than the absolute minimum, while also expanding commercial relations with the Soviets.
In 1955, the weekly Die Zeit described what it called the “fireside fantasy of West German industry” to normalize trade relations with the Soviet Union. Within years, that dream became a reality, driven in large measure by Chancellor Willy Brandt’s détente policies, known as Ostpolitik.
Joe Biden, eager to reverse the diplomatic damage inflicted during the Trump years, reversed course and has gone out of his way to show his appreciation for all things German | Thomas Lohnes/Getty Images
That’s one reason the Germans so feared U.S. President Ronald Reagan and his hard line against the Soviets. Far from welcoming his “Mr. Gorbachev, tear down this wall” demand, both the German public and industry were terrified by it, worried that Reagan would upset the apple cart and destroy their business in the east.
By the time the Berlin Wall fell a couple of years later, West German exports to the Soviet Union had reached nearly 12 billion deutsche mark, a record.
That’s why Germany’s handling of Ukraine isn’t a departure from the norm; it is the norm.
Germany’s dithering over aid to Ukraine is a logical extension of a strategy that has served its economy well from the Cold War to the decision to block Ukraine’s NATO accession in 2008 to Nord Stream.
Just last week, as the Russians were raining terror on Dnipro, the minister president of Saxony, Michael Kretschmer, called for the repair of the Nord Stream 1 pipeline, which was blown up by unknown saboteurs last year, so that Germany “keeps the option” to purchase Russian gas after war ends.
One can’t blame him for trying. If one accepts that German policy is driven by economic logic rather than moral imperative, the fickleness of its political leaders makes complete sense — all the more so considering how well it has worked.
The money Germany has saved on defense has enabled it to finance one of the world’s most generous welfare states. When Germany was under pressure from allies a few years ago to finally meet NATO’s 2 percent of GDP spending target, then-Vice Chancellor Sigmar Gabriel called the goal “absurd.” And from a German perspective, he was right; why buy the cow when you can get the milk for free?
Of course, the Germans have had a lot of help milking, especially from the U.S.
American presidents have been chastising Germany over its lackluster contribution to the Western alliance going as far back as Dwight D. Eisenhower, only to do nothing about it.
The exception that proves the rule is Donald Trump, whose plan to withdraw most U.S. troops from Germany was thwarted by his election loss.
Joe Biden, eager to reverse the diplomatic damage inflicted during the Trump years, reversed course and has gone out of his way to show his appreciation for all things German.
Biden’s decision to court the Germans instead of castigating them for failing to meet their commitments taught Berlin that it merely needs to wait out crises in the transatlantic relationship and the problems will fix themselves. Under pressure from Trump to buy American liquefied natural gas, then-Chancellor Angela Merkel agreed in 2018 to support the construction of the necessary infrastructure. After Trump, those plans were put on ice, only to revive them amid the current energy crisis.
By virtue of its size and geographical position at the center of Europe, Germany will always be important for the U.S., if not as a true ally, at least as an erstwhile partner and staging ground for the American military.
Who cares that the Bundeswehr has become a punchline or that Germany remains years away from meeting its NATO spending targets?
In Washington’s view, Germany might be a bad ally, but at least it’s America’s bad ally.
And no one understands the benefits of that status better than the Germans themselves.
The U.S. ambassador to the North Atlantic Treaty Organization, Julianne Smith, said she was “not worried” about former President Donald Trump’s possible return to the White House.
“The NATO alliance enjoys deep bipartisan support across Congress and amongst the American people,” Smith said Wednesday during the annual POLITICO 28 ranking gala.
“And I’m not worried. I think he [Trump] knows that it’s in a really good spot back home,” she added.
Trump announced last month that he would run for a second term in 2024. During his presidency, he frequently criticized NATO members for not meeting the alliance’s spending targets.
In 2018, he threatened that the U.S. would go its “own way” if the other member countries did not increase their financial commitments to NATO.
Two years later, John Bolton — Trump’s former national security adviser — judged there was a “very real risk” the U.S. would withdraw from NATO if Trump were reelected.
Created to counterbalance the rise of the Soviet Union after World War II, NATO was catapulted back into the spotlight by Russia’s invasion of Ukraine in February.
Since then, a “majority” of alliance members have “committed to investing more, and more quickly, on defence,” according to the organization.
In September, Ukraine requested an accelerated process to join NATO, a move that has long been considered a red line by Moscow, which sees the military alliance’s eastern expansion in the last few decades as a threat to its security.
The transatlantic reset between Brussels and Washington is on life support.
After four years of discord and disruption under Donald Trump, hopes were high that Joe Biden’s presidency would usher in a new era of cooperation between Europe and the U.S. after he declared: “America is back.”
But when senior officials from both sides meet in Washington on Monday for a twice-yearly summit on technology and trade, the mood will be gloomier than at any time since Trump left office.
The European Union is up in arms over Biden’s plans for hefty subsidies for made-in-America electric cars, claiming these payments, which partly kick in from January 1, are nothing more than outright trade protectionism.
At the same time, the U.S. is increasingly frustrated the 27-country bloc won’t be more aggressive in pushing back against China, accusing some European governments of caving in to Beijing’s economic might.
Those frictions are expected to overshadow the so-called EU-U.S. Trade and Technology Council (TTC) summit this week. At a time when the Western alliance is seeking to maintain a show of unity and strength in the face of Russian aggression and Chinese authoritarianism, the geopolitical stakes are high.
Biden may have helped matters last Thursday, during a joint press conference with French President Emmanuel Macron, by saying he believed the two sides can still resolve some of the concerns the EU has raised.
“We’re going to continue to create manufacturing jobs in America but not at the expense of Europe,” Biden said. “We can work out some of the differences that exist, I’m confident.”
But, as ever, the details will be crucial.
It is unclear what Biden can do to stop his Buy American subsidies from hurting European car-markers, for example, many of which come from powerful member countries like France and Germany. The TTC summit offers a crucial early opportunity for the two sides to begin to rebuild trust and start to deliver on Biden’s warm rhetoric.
Judging by the TTC’s record so far, those attending, who will include U.S. Secretary of State Antony Blinken, will have their work cut out.
More than 20 officials, policymakers and industry and society groups involved in the summit told POLITICO that the lofty expectations for the TTC have yet to deliver concrete results. Almost all of the individuals spoke on the condition of anonymity to discuss sensitive internal deliberations.
U.S. Secretary of State Antony Blinken will be attending the TTC | Sean Gallup/Getty Images
Some officials privately accused their counterparts of broken promises, particularly on trade. Others are frustrated at a lack of progress in 10 working groups on topics like helping small businesses to digitize and tackling climate change.
“With these kinds of allies, who needs enemies?” said one EU trade diplomat when asked about tensions around upcoming U.S. electric car subsidies. A senior U.S. official working on the summit hit back: “We need the Europeans to play ball on China. So far, we haven’t had much luck.”
Much of the EU-U.S. friction is down to three letters: IRA.
Biden’s Inflation Reduction Act, which provides subsidies to “Buy American” when it comes to purchasing electric vehicles, has infuriated officials in Brussels who see it as undermining the multilateral trading system and a direct threat to the bloc’s rival car industry.
“The expectation the TTC was established to provide a forum for precisely these advanced exchanges with a view to preventing trade frictions before they arise appears to have been severely frustrated,” said David Kleimann, a trade expert at the Bruegel think tank in Brussels.
Biden’s room for flexibility is limited. The context for the subsidies and tax breaks is his desire to make good on his promise to create more manufacturing jobs ahead of an expected re-election run in 2024. The U.S. itself is hovering on the edge of a possible recession.
In addition, the U.S. trade deficit with the EU hit a record $218 billion in 2021, second only to the U.S. trade deficit with China. The U.S. also ran an auto trade deficit of about $22 billion with European countries, with Germany accounting for the largest share of that.
Washington has few, if any, meaningful policy levers at its disposal to calm European anger. During a recent visit to the EU, Katherine Tai, the U.S. trade representative, urged European countries to pass their own subsidies to jumpstart Europe’s electric car production, according to three officials with knowledge of those discussions.
“It risks being the elephant in the room,” said Emily Benson, a senior fellow at the Center for Strategic and International Studies, a Washington-based think tank, when asked about the electric car dispute.
After a push from Brussels, there were increasing signs on Friday that the TTC could still play a role. In the latest version of the TTC’s draft declaration, obtained by POLITICO, both sides commit to addressing the European concerns over Biden’s subsidies, including via the Trade and Tech Council. Again, though, there was no detail on how Washington could resolve the issue.
Politicians across Europe are already drawing up plans to fight back against Biden’s subsidies. That may include taking the matter to the World Trade Organization, hitting the U.S. with retaliatory tariffs or passing a “Buy European Act” that would nudge EU consumers and businesses to buy locally made goods and components.
Officials and business leaders pose for a photo during the TTC in September 2021 | Pool photo by Rebecca Droke/AFP via Getty Images
Privately, Washington has not been in the mood to give ground. Speaking to POLITICO before Biden met Macron, five U.S. policymakers said the IRA was not aimed at alienating allies, stressing that the green subsidies fit the very climate change goals that Europe has long called on America to adopt.
“There’s just a huge amount to be done and more frankly to be done than the market would provide for on its own,” said a senior White House official, who was not authorized to speak on the record. “We think the Inflation Reduction Act is reflective of that type of step, but we also think there is a space here for Europe and others, frankly, to take similar steps.”
China tensions
Senior politicians attending the summit are expected to play down tensions this week when they announce a series of joint EU-U.S. projects.
These include funds for two telecommunications projects in Jamaica and Kenya and the announcement of new rules for how the emerging technology of so-called trustworthy artificial intelligence can develop. There’s also expected to be a plan for more coordination to highlight potential blockages in semiconductor supply chains, according to the draft summit statement obtained by POLITICO.
Yet even on an issue like microchips — where both Washington and Brussels have earmarked tens of billions of euros to subsidize local production — geopolitics intervenes.
For months, U.S. officials have pushed hard for their European counterparts to agree to export controls to stop high-end semiconductor manufacturing equipment being sent to China, according to four officials with knowledge of those discussions.
Washington already passed legislation to stop Chinese companies from using such American-made hardware. The White House had been eager for the European Commission to back similar export controls, particularly as the Dutch firm ASML produced equipment crucial for high-end chipmaking worldwide.
Yet EU officials preparing for the TTC meeting said such requests had never been made formally to Brussels. The draft summit communiqué makes just a passing reference to China and threats from so-called non-market economies.
Unlike the U.S., the EU remains divided on how to approach Beijing as some countries like Germany have long-standing economic ties with Chinese businesses that they are reluctant to give up. Without a consensus among EU governments, Brussels has little to offer Washington to help its anti-China push.
“In theory, the TTC is not about China, but in practice, every discussion with the U.S. is,” said one senior EU official, speaking on the condition of anonymity. “If we talk with Katherine Tai about Burger King, it has an anti-China effect.”
Gavin Bade, Clea Caulcutt, Samuel Stolton and Camille Gijs contributed reporting.
Former United States President Donald Trump was a useful bogeyman for Europe. His successor, Joe Biden, is proving much trickier — a friend who says all the right things but leaves you in the lurch when it counts.
At each new perceived slight, the Europeans express shock, frustration and dismay: How could Washington fail to consult its allies, or at the very least inform them of its plans? Meanwhile, the American response is always some variant of: Terribly sorry, we didn’t even think of that.
The underlying dynamic is one of polite indifference. Despite Washington’s renewed commitment to NATO and massive outlay of arms and funds to help Ukraine defend itself against Russia, the U.S. remains steadfastly focused on what most perceive to be its main existential challenge: China.
In that equation, Europe is often an afterthought. It’s just that many on this side of the Atlantic have failed to get the message — or draw conclusions of what it means for the bloc’s future — instead preferring to act out a script of outrage and remonstrance.
A current example is the blooming transatlantic argument over Biden’s IRA.
Months in the making, painstakingly hashed out on Capitol Hill, the legislation represents Washington’s best bipartisan effort thus far to decarbonize its economy and prepare for decoupling from China. The bill flags $369 billion for energy and climate programs, including billions in taxpayer-funded subsidies for the production of electric vehicles inside the U.S.
It just so happens that it’s a potential disaster for Europe.
Bruised and confused
Amid an energy crisis that has large parts of the European Union economy staring into an abyss, French President Emmanuel Macron has led the charge against Biden’s IRA, accusing Washington of maintaining a “double standard” on energy and trade. He’s called for Europe to respond in kind by rolling out its own subsidy plan, prompting a visit from U.S. Trade Representative Katherine Tai to an EU trade ministers’ meeting in Prague on October 31.
But rather than try to cajole them with concessions, Tai invited them to get on board the China train by rolling out their own subsidies — which isn’t what the Europeans wanted to hear.
According to an EU diplomat who spoke to POLITICO ahead of a trade ministers’ meeting on Friday, members of the bloc still hope that Biden will send the IRA back to Congress for resizing, a prospect U.S. officials say is about as likely as canceling Thanksgiving.
The result is that Europe is now back in familiar territory: Bruised, confused and scrambling for a response while failing to formulate its own cohesive strategy to contend with China. And instead of receiving solidarity from Washington in a time of war, they feel the U.S. has maneuvered itself into a perfect position to suck investment out of Europe.
The outlines of an EU response to the IRA did start to take shape earlier this week, when Paris and Berlin — only recently back on speaking terms after a falling out — jointly called for an EU plan to subsidize domestic industries.
But that plan is likely weeks, even months, away from becoming a reality. And even if all 27 EU countries manage to strike a deal, their leaders will be hard-pressed to inject anywhere near as much money into it as Washington has earmarked, as most EU countries are still howling in pain over the high price of gas — much of which they now import from liquid natural gas terminals in Texas.
Again, Biden’s America is looking after its interests while the EU’s left to groan about missed signals, hurt feelings and unfair practices.
The tragedy for Europe is that this is happening at a time when transatlantic relations are meant to be at an all-time high. Biden’s election, followed by the war in Ukraine and Washington’s massive investment in shoring up NATO’s eastern flank, was meant to signal the U.S.’s decisive return to the European sphere.
But what the Europeans are discovering is that the Ukraine war is just one facet of the U.S.’s larger strategic duel with China, which will always take precedence over EU interests.
That was true under Trump, and it remains true under his successor. It’s just that the message is delivered in a different style.
In the long run, Biden’s polite indifference may prove more deadly.
BERLIN/PARIS — After publicly falling out, Olaf Scholz and Emmanuel Macron have found something they agree on: mounting alarm over unfair competition from the U.S. and the potential need for Europe to hit back.
The German chancellor and the French president discussed their joint concerns during nearly three-and-a-half hours of talks over a lunch of fish, wine and Champagne in Paris on Wednesday.
They agreed that recent American state subsidy plans represent market-distorting measures that aim to convince companies to shift their production to the U.S., according to people familiar with their discussions. And that is a problem they want the European Union to address.
The meeting of minds on this issue followed public disagreements in recent weeks on key political issues such as energy and defense, fracturing what is often seen as the EU’s central political alliance between its two biggest economies.
But even though their lunch came against an awkward backdrop, both leaders agreed that the EU cannot remain idle if Washington pushes ahead with its Inflation Reduction Act, which offers tax cuts and energy benefits for companies investing on U.S. soil, in its current form. Specifically, the recently signed U.S. legislation encourages consumers to “Buy American” when it comes to choosing an electric vehicle — a move particularly galling for major car industries in the likes of France and Germany.
The message from the Paris lunch is: If the U.S. doesn’t scale back, then the EU will have to strike back. Similar incentive schemes for companies will be needed to avoid unfair competition or losing investments. That move would risk plunging transatlantic relations into a new trade war.
Macron was the first to make the stark warning public. “We need a Buy European Act like the Americans, we need to reserve [our subsidies] for our European manufacturers,” the French president said Wednesday night in an interview with TV channel France 2, referring specifically to state subsidies for electric cars.
Scholz and Macron agreed the EU must act if the US progresses a ‘Buy American’ act offering incentives for companies investing on US soil, which would particularly affect French and German electric vehicle industries | David Hecker / Getty Images
Macron also mentioned similar concerns about state-subsidized competition from China: “You have China that is protecting its industry, the U.S. that is protecting its industry and Europe that is an open house,” Macron said, adding: “[Scholz and I] have a real convergence to move forward on the topic, we had a very good conversation.”
Crucially, Berlin — which has traditionally been more reluctant when it comes to confronting the U.S. in trade disputes — is indeed backing the French push. Scholz agrees that the EU will need to roll out countermeasures similar to the U.S. scheme if Washington refuses to address key concerns voiced by Berlin and Paris, according to people familiar with the chancellor’s thinking.
Scholz is not a big fan of Macron’s wording of a “Buy European Act” as it evokes the nearly 90-year-old “Buy American Act,” which is often criticized for being protectionist because it favors American companies. But the chancellor shares Macron’s concerns about unfair competitive advantages, the people said.
Earlier this month, Scholz said publicly that Europe will have to discuss the Inflation Reduction Act with the U.S. “in great depth.”
In a blow to Germany’s industrial core, chemical giant BASF announced plans Wednesday to reduce its business activities and jobs in Germany, with company chief Martin Brudermüller citing heightened gas prices — which he criticized for being six times as high as in the U.S. — as well as increasing EU regulation as the reason.
“The decisions of a successful company like BASF show that we need to improve the overall attractiveness of Germany as a business location,” German Finance Minister Christian Lindner said in a tweet, vowing to take various measures such as “tax relief for private investments.”
Before bringing out the big guns, though, Scholz and Macron want to try to reach a negotiated solution with Washington. This should be done via a new “EU-U.S. Taskforce on the Inflation Reduction Act” that was established during a meeting between European Commission President Ursula von der Leyen and U.S. Deputy National Security Adviser Mike Pyle on Tuesday.
The taskforce of EU and U.S. officials will meet via videoconference toward the end of next week, underlining the seriousness of the European push.
On top of that, EU trade ministers will gather for an informal meeting in Prague next Monday, with U.S. trade envoy Katherine Tai planning to attend to discuss the tensions.
In Brussels, the Commission is also looking with concern at Macron’s wording of a “Buy European Act,” which evokes protectionist tendencies that the EU institution has long sought to fight.
“Every measure we take needs to be in line with the World Trade Organization rules,” a Commission official said, adding that Europe and the U.S. should resolve differences via talks and “not descend into tit-for-tat trade war measures as we experienced them under [former U.S. President Donald] Trump.”
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
PARIS — Emmanuel Macron called for a “Buy European Act” on Wednesday to protect carmakers on the Continent in the face of competition from China and in response to the United States’ own controversial scheme to incentivize domestic production.
Speaking on TV channel France 2, the French president criticized the European Union as being “too open” on the topic of state subsidies for electric cars as it seeks to accelerate its transition to greener energy sources.
“We need a Buy European Act like the Americans, we need to reserve [our subsidies] for our European manufacturers,” Macron said. “You have China that is protecting its industry, the U.S. that is protecting its industry and Europe that is an open house.”
France has been leading the charge against Washington’s recent Inflation Reduction Act, which includes tax incentives for U.S. consumers to “Buy American” when it comes to choosing an electric car. The European Union, South Korea, Japan, China and Russia have all complained at the World Trade Organization that this measure violates international trade rules by unfairly discriminating against foreign manufacturers.
French Finance Minister Bruno Le Maire also recently slammed the U.S. scheme as “jeopardizing the level playing field” and raising the risk of a “new trade war.”
Macron said in the TV interview he had discussed an EU response to U.S. trade barriers during a lunch with German Chancellor Olaf Scholz at the Elysée Palace earlier on Wednesday. However, it was unclear whether the two leaders share the same view on exactly what steps to take.
“[Scholz and I] have a real convergence to move forward on the topic, we had a very good conversation,” Macron said.
Relations between the French president and his German counterpart have been fraught amid disagreements over energy, defense and the economy. But discontent over the U.S. legislation appears to be an area where they converge, given both their countries host major carmakers like Renault and Mercedes-Benz.
According to an adviser to the French presidency, the two leaders agreed to push the European Commission to prepare a response to the U.S. Inflation Reduction Act.
Giorgio Leali contributed reporting.
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
