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Currency, United States Finance

Op-Ed: Germans fearing China's world order? Worry about the EU instead

Criticizing what he saw as Washington’s isolationist bent, German Finance Minister Wolfgang Schäuble voiced a concern in a speech earlier this month that the West could be threatened as China (and Russia) might fill the void. That, he feared, “would be the end of our liberal world order.”

He also said that the U.S. was no longer willing to act as a “guardian of global order,” apparently because Washington withdrew from the agreement on climate change, and it allegedly showed no interest for cooperative migration and security policies.

The U.S. Department of State has probably something to say about that, but I wish Schäuble were at least partly right. Arguably, the U.S. could cut back on some foreign engagements and pay more attention to pressing domestic problems.

That said, I wonder how the German minister fails to see that the U.S. is all over the map in active, proxy and hybrid warfare — Afghanistan, the Middle East and North Africa, Korean Peninsula, Central and Eastern Europe and the South China Sea.

What else would he want? A nuclear war with China and Russia?

Germany may wish to think about whether it is in its interest to fuel and broaden the points of friction with the United States. In my view, Berlin should leave the big power dealings alone.

Washington and Beijing are engaged on a broad range of issues to build a historically unique relationship between an established superpower and a runner-up that needs space to develop and contribute to the world in peace and harmony. In trying to do that, the two countries are blazing totally new trails of modern statecraft. Ubiquitous analogies of Sparta (an established power) and Athens (a rapidly developing strategic competitor), and their ensuing Peloponnesian War, are worthless in the case of countries with huge nuclear arsenals and ground, sea, air and airspace delivery vehicles.

So, yes, Germany should leave that alone and get over its fury at Washington’s decision to stop the hemorrhage of foreign trade accounts that are killing jobs, incomes and whatever is left of American manufacturing industries.

China got that message and is doing something about it. In the first four months of this year, American export sales to China soared 16.1 percent. By contrast, U.S. exports to the EU, which account for one-fifth of the total, barely eked out a 2.7 percent increase.

Apart from that, the U.S. did not create, or invent, the German and EU problems. Washington just issued a warning about (a) America’s systematic and unsustainable trade deficits with the EU ($165 billion in 2016), (b) free-loading on America’s military protection by ignoring financial obligations to the NATO alliance, (c) the EU serving as an instrument of German interests and (d) Brexit as an echo to British voices that they voted for U.K.’s accession to the EU in 1973, but did not expect to be governed by Germany.

Instead of taking counsel from Kantian rationality, Germans now seem overcome by anger in response to perfectly justified American warnings — and widely shared concerns about German economic policies throughout the EU, a house of peace and prosperity built by Schuman, Monnet, Adenauer ….

Indeed, a constant lashing out at America should not be a diversion from Germany’s inability to contribute to effective management of the EU’s existential problems.

Brexit, after all, did not happen overnight; it was a long time coming. And it just took an act of British democratic traditions to consult the people on issues of formally “shared sovereignty.” The response was clear: The British did not want to board up their revered Palace of Westminster, the cradle of modern parliamentary democracy.

In my view, Brexit was caused less by an original sin — i.e., admitting to the EU a country with free-trading traditions and a fierce attachment to national sovereignty — than by the EU’s French-German mismanagement and stubborn resistance to change.

Most British concerns were also shared by nearly half of the French electorate (Front National, La France insoumise and Debout la France) during the first round of presidential elections in April. Those problems are still there as witnessed by a spectacular — 57.36 percent — abstention in the second round of French parliamentary elections on June 18. The rate of abstention among people 35 or younger was 75 percent, with another 70 percent among the low-income people.

The new French president says that Europe will take care of all that. He is telling the skeptical French that the country’s problems can only be solved in a “Europe that protects (from unbridled free trade and a chaotic globalization)” and a “Europe that protects with safe borders.” (Guess who said that first, but lost the elections?)

Let’s see how that’s done … in a community of different national interests, traditions and values.

For example, the feisty Visegrad Group (Poland, Hungary, the Czech Republic and Slovakia) does not want Europe to intrude on its sovereign decisions about immigration and issues of culture and national identity, while the Scandinavians want untrammeled globalization and free trade.

That is what drove the U.K. out, but the French, with a German nod, are saying no to “Europe à la carte,” unless, of course, it’s a French-German menu du jour. Paris and Berlin are threatening sanctions and withholding of regional development funds to those disobeying their orders.

Again, let’s see how that is done in EU councils where decisions are taken with unanimous votes.

In the middle of all that, Italy and Greece are crying out for help in dealing every day with hundreds and thousands of migrants/refugees from the Middle East and North Africa.

So, before worrying about China’s feared domination of the world order, Germany should help solve the existential problems of a captive market where it collected last year a trade surplus of 162.8 billion euros — a whopping 65 percent of its total net exports.

Germany should also worry about an appearance of Paris and Berlin talking past each other. France, currently driven by a neophyte zeal, wants serious EU institutional innovations, even those involving treaty changes, while Germany keeps saying “yes, but…” And, in a sobering reminder, Germany also keeps repeating that France has to reform its labor markets and tax codes, and to have its budget deficit (3.4 percent of GDP) and public debt (96 percent of GDP) converging with Germany’s budget surplus (0.8 percent of GDP) and a much lower public debt (68.3 percent).

These are tough issues. They are political dynamite in France, where the government now says that it will be very difficult to keep the commitment of bringing the budget deficit down to 2.8 percent of GDP by the end of this year.

Berlin may wish to think about calmer and more constructive U.S.-German relations.

German unfair and disparaging remarks about China could be very costly mistakes. Siemens, Volkswagen, Daimler, BMW and large chunks of the Mittelstand may have something to say about that.

Germany has to make up its mind with regard to the European integration. Bullying the Visegrad Group (and Baltic States) — a task that Germany has subcontracted to France due to dark pages of its history — and pillorying Greece (a task Germany was eager to continue) won’t work.

These countries will run to the U.S. for cover, as some of them are doing now by demanding large contingents of U.S. armed forces on their soil. Also, the U.S. will not be indifferent to the mistreatment of the long suffering Greece. That is America’s key strategic base in the Mediterranean, and a location of new military installations on the island of Crete to monitor the Middle East.

Building on the excellent work of the European Central Bank (ECB), Germany and France can do a lot to advance the cause of peace and prosperity in Europe.

Let’s watch and give them a cautious benefit of the doubt.

Source: cnbc
Op-Ed: Germans fearing China's world order? Worry about the EU instead

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