EU-US relations may be at a turning point

Analysis

The United States' European allies were under no illusion ever since Trump's first visit to Brussels in May 2017 that the rhetoric of multilateralism and common transatlantic values had been superseded in Washington by a hard-nosed fixation on material interests and 'America first'.

Moreover, Trump clearly communicated his conviction early on that the United States had been "humiliated" and "taken advantage of" over decades by friends and foe alike. In his view, European allies in general and Germany, in particular, had benefitted tremendously from US security guarantees without adequately reciprocating (see GERMANY/US: Berlin will reorient its policy - January 23, 2018).

National security threats?

It was consistent with this world view that the initial announcement of the imposition of tariffs in early March was justified with reference to the Trade Expansion Act (see EU/US: Tariffs could fracture partnership - April 6, 2018). Section 232 allows for such tariffs on the grounds of national security.

In this understanding, European allies similarly contributed to threats to US national security by defending the Joint Comprehensive Plan of Action (JCPOA) between Iran and the United States, the EU, Russia and China.

In both cases, some in the EU had hoped until the end that deals could be struck with Trump, who has in the past praised his deal-making skills. EU diplomats and senior negotiators had met with US officials and Trump personally only to find out that this was not possible.

The EU has three options to react to the US decisions.

Acquiescence

The EU can acquiesce and submit to US demands.

In trade, this would translate into accepting further demands of the Trump administration in addition to those informally agreed in the run-up to the April 30 decision. The EU could, among other things, seek to establish a deeper energy partnership with the United States and commit to purchasing more US liquefied natural gas.

On the JCPOA, it would mean to continue discussions with the United States on how to reinforce safety measures guaranteeing that Iran cannot acquire nuclear weapons and accept that business opportunities in Iran for European companies will be terminated via secondary US sanctions (see IRAN: Partners will struggle to save the nuclear deal - May 9, 2018).

Counter-posturing

The EU could also stand up to the United States. On trade, this would mean signalling that no additional concessions will be forthcoming during the 30-day extension of the US deadline.

On the JCPOA, the EU could choose a mixed approach. It could balance US unilateralism through direct coordination with Russia and China, and Iran. It could also reactivate 'blocking legislation' that would allow the European Commission to punish European companies submitting to US secondary sanctions.

Home Affairs Commissioner Dimitris Avramopoulos said yesterday the Commission would be "ready" if necessary. If it implemented blocking legislation, it would also have to compensate European companies for whatever costs they incurred as a result of US sanctions.

Blocking legislation was previously issued in 1996 to counter similar US threats with regard to secondary sanctions on Cuba and Libya.

Combination of acquiescence and counter-posturing

The third option is a combination of acquiescence and counter-posturing. This is the most likely outcome for several reasons.

Risks associated with acquiescence

Outright acquiescence is unlikely because it would signal to the Trump administration that the EU accepts submission if only pushed hard enough.

Since Trump has been very explicit about his style of deal-making in his book 'The Art of the Deal', European negotiators are aware that Trump likes to start from a maximalist negotiating position, and pushes to hold it. "Sometimes I settle for less than I sought, but in most cases I still end up with what l want," Trump wrote.

Outright submission would also amount to a publicly documented acknowledgement that the EU is a weak global player. Shortly after Trump's withdrawal from the JCPOA, his new National Security Advisor John Bolton quoted former Secretary of State Dean Acheson that the United States "only negotiates from positions of strength". This was directed at Iran.

However, the United States' 'diplomacy from strength' had already been experienced by the Europeans, who now need to decide whether to accept it.

Risks associated with outright opposition

Outright opposition also carries significant risks for the EU.

The EU collectively and European states individually have more than a year of experience that Trump is not only "pushing and pushing" but also cultivating unpredictability.

Regardless of whether this is a character trait or a strategically chosen tool in deal-making, it carries risks for all sides involved. For the EU, there is the danger that it might translate into an explicit US strategy to divide European allies by using enticing carrots and harsh sticks targeted at individual EU member states.

The risks are higher than in 1996 because then President Bill Clinton's administration could be counted on as valuing the alliance and effective multilateralism. Trump and his key advisors have made it clear (and their comments are highly credible) that they look at NATO and the EU primarily in terms of transactional benefits suiting 'America first'.

There are also hints from meetings in Brussels that the Commission will not follow through with blocking legislation if large member states oppose such a measure. In particular, the German government appears reluctant to move to such an escalatory level, possibly out of fear that the United States would be willing to escalate further.

Finally, openly siding with China and Russia could provoke US countermeasures and threaten US security guarantees while carrying few immediate benefits. Transactional EU diplomacy with Beijing and Moscow will not lead to reliable and lasting alternative arrangements.

Outlook

Transatlantic relations are at a turning point. The United States is betting that it can get its way with an open show of strength, even if this threatens to humiliate close allies.

The EU realises that fierce transactional winds are blowing from all cardinal points of international politics. These winds threaten to undermine the very modus operandi of multilateralism on which it has thrived since its inception as well as the very foundation on which it was built, with US support, after the Second World War.

While the long-term consequences are unclear, one thing appears certain: the West will come out weakened.