EU/US: Better relations depend on both sides

Analysis

The election of Barack Obama as US president ushers in a new chapter in US-EU relations. In contrast to his predecessor, Obama is more multilateral in his approach, more attentive to diplomacy, and more focused on the Atlantic alliance. This combination of attributes points to many new opportunities, but it also raises expectations and it creates unexpected challenges.

Atlanticism. The incoming Obama administration will be committed to working with its European allies but also to reshaping the United States along lines that are much more consistent with European values. For example, compared to his predecessor, he is:

• more committed to social solidarity and universal healthcare;
• more secular in his view of the relations between church and state; and
• more willing to recognise the positive role that the state can play in the marketplace.

This will make it both easier for European leaders to work with an Obama administration and more popular for them to do so. This marks a sharp contrast with the second Bush administration, which tried but failed to rebuild close relations across the Atlantic largely due to the unpopularity of the Bush presidency and the perceived gap between American and European values. The new points of contact between the United States and the EU will centre on trade, regulation, environmental protection and humanitarian assistance.

Protectionism. Obama has often (but misleadingly) been portrayed as a protectionist (see UNITED STATES: Obama's economic platform takes shape - May 21, 2008). In fact, his trade agenda is very similar to that pursued by former European Trade Commissioner Peter Mandelson. Mandelson argued that free trade should be contingent upon the pursuit of equivalent standards of environmental and labour protection on both sides of any relationship. He advocated this both in the Doha Round of multilateral trade talks and in bilateral agreements between specific countries and the EU. Obama has made a similar case for revisiting the free trade agreements between the United States and its Latin American partners -- particularly Colombia.

Should the Obama administration decide to pursue this strategy in restarting the Doha Round (or moving beyond it), it would broaden the attention given to 'beyond-the-border' trade concerns, but not alleviate conflict between EU and US trade negotiators. On the contrary, disputes may become even more complicated given that Obama has different standards for 'beyond-the-border' fairness in mind. The EU would have to work harder to reform agricultural subsidies at home and to promote common standards beyond foreign borders.

'Socialism'. Before he tackles trade issues, Obama will have to address the financial crisis. Like other governments, he will do this through a combination of palliative and curative measures:

• The EU will find it easy to work with him on the palliative side: interest rate reductions and stimulus packages have positive effects that cross national borders.
• The challenge will come when Obama turns to curative issues relating to corporate governance (executive compensation, shareholder rights); prudential oversight (capital adequacy ratios); and financial market supervision (regulation of derivatives or special investment vehicles).

The outgoing Bush administration had a largely hands-off approach to market regulation. This created an opening for the EU and its member states to build consensus around generalised best practice -- like the development of 'International Financial Reporting Standards' now predominant in many parts of the globe (see EUROPEAN UNION: Directive will not hit competitiveness - February 1, 2007). The Obama administration is more likely to be hands-on in its approach. This will underscore the contrast between decisive executive leadership in the United States and the slower process of consensus-building in Europe. It will also create opportunities for Washington to seek European allies, strengthening its own position while inadvertently clogging up the decision-making practices of the EU. The new global financial architecture is likely to have a stronger US imprint as a result.

Environmentalism. Concern for the environment will also be high on the incoming administration's agenda -- particularly over the long term:

• Emissions trading. This is likely to mean a strong drive to renegotiate the protocols for reducing the emission of greenhouse gases centring on a mechanism for the capping and trading of permits. This is in line with European preferences, but may leapfrog the EU's ability to generate consensus on a common negotiating stance. Worse, the EU faces the prospect that Obama will be able to steal the cloak of moral authority both because of his global popularity and in light of growing recognition of the EU's implementation gap (see EUROPEAN UNION: Finance crisis derails climate targets - October 13, 2008).
• Energy technology. The problem becomes even greater when attention turns to energy technology. Obama not only benefits from the political mandate for decisive action -- including state subsidy for basic research -- but also from the synergies available at the nexus between high technology industries and government contracting. Centre-left pundits in the United States have long argued that energy technology will constitute the next industrial revolution. Now they have a president who appears eager to make that happen.

Internationalism. The humanitarian and crisis agenda will also be a point of concern. Obama has made it clear that he will give priority to withdrawing from Iraq and to 'winning' the war in Afghanistan. This will mean greater US pressure for the EU to play an active role elsewhere (see EU/US: Transatlantic re-engagement needs strong will - September 19, 2008). Yet with so many crises developing -- for example, Darfur or Great Lakes region in Africa -- it is doubtful that the EU has the institutional ability and willingness to act.

The danger is that failure of the EU to act as an effective transatlantic partner will get marked down as a failure of the whole European Security and Defence Policy and the Common Foreign and Security Policy. As was the case during the Yugoslav conflict under the Clinton administration, the Democrats in the United States will grow frustrated with perceived European diffidence and begin to act more unilaterally in security policy and foreign affairs.

Obama the novice. Such disaffection potentially cuts both ways and the EU may also grow disappointed with the Obama administration. Early and unforced errors in foreign policy could remind EU leaders of Obama's relative inexperience. The conflict with Russia over the missile defence shield is one possible problem; the prospect of NATO enlargement to the Ukraine and Georgia is another. EU leaders will watch closely how the incoming president handles himself to determine whether he is up to the challenge or whether, like former President John F Kennedy, he is prone to early mistakes.