The EU Again

In a remarkably destructive bit of policy making, the EU announced that it will not sign any agreements with countries that are not party to the Paris Climate Accords. That includes free trade agreements. And of course, the country in the EU’s gunsights is none other than the United States. Which means that the EU has told the U.S. in no uncertain terms that in order to trade with Europe, America must surrender its sovereignty to the central planners that populate the EU bureaucracy.

Fat chance.

Issue linkage is a tool commonly used by diplomats to get to agreements that might not otherwise be reached. The log rolling inherent in this sort of thing allows each side of a negotiation to come out claiming victory, thus greasing the skids. This however is something entirely different. It is an ultimatum. As such, it sets up a test of wills that structurally resembles a game of chicken in which each side has an incentive to escalate rather than resolve the conflict.

In this, the EU is rather obviously overplaying its hand, and the consequences could very well be catastrophic. Consider the fact that various forms of nationalism are sweeping the globe, so that very few politicians have an incentive to be seen as neo-liberals to begin with. Britain has already had its Brexit vote; Macron has conceded that if France had a referendum on the EU, French citizens would vote to withdraw; Scotland is once again making noise about exiting the UK, and Spain only managed to keep the Basque region from seceding by the use of police truncheons.

Also consider what the U.S. response to all this may be. Donald Trump for one has already made clear that he has little use for either free trade or NATO. Suppose his response is to escalate further and say that the U.S. is just fine without a trade agreement with the EU, and by the way, the U.S. is going to begin withdrawing troops from Germany in preparation for leaving NATO. Without benefit of the U.S. nuclear umbrella, Europe can feel free to devise its own foreign policy for dealing with the Russian Bear, a prospect that Vladimir Putin would surely relish. That this would be a geopolitical catastrophe is an understatement.

The irony of all this is that it probably has little to do with the purported issue of climate change. Over the last several years the U.S. has become the largest energy exporter in the world, largely due to fracking. The U.S. is now largely “energy independent” in that it exports more than it imports. And because of fracking U.S. manufacturing has developed significant energy cost advantages over European firms. The EU’s latest gambit probably represents old fashioned protectionism gussied up as concern over the never quite defined issue of climate change.

Regardless of motive, the EU’s announcement was reckless in the extreme and could very well have far reaching consequences whose deleterious effects are likely to fall most heavily on the Europeans themselves, and stay with us for a long time. That, after all, is the story of European colonialism, and World Wars I and II. Perhaps they should give up playing empire and mind their own back yard which is in serious need of repair.

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