Trade

Germany gains upper hand in European split over Trump trade strategy

Only a week before European Commission President Jean-Claude Juncker flies to Washington, France and Germany are divided over how much he should offer to U.S. President Donald Trump to end a deepening trade war, say European diplomats and officials.

But, they add, Germany has the upper hand. Berlin is shaping Junckers agenda, suggesting three offers that he could take to Trump on July 25 to resolve the dispute, according to people familiar with the plans.

The French are uneasy about the wisdom of such a conciliatory approach, however, and publicly accuse Trump of seeking to splinter and weaken the 28-member bloc, which he has called his “foe.”

Despite Paris reservations about giving away too much to the increasingly hostile U.S. president, the diplomats say that the European Commissions powerful Secretary-General Martin Selmayr supports the German attempt at rapprochement, which makes it more likely that Juncker will offer some kind of trade fix next week.

“Its clear that Juncker cant go to Washington empty-handed,” one diplomat said. He stressed that Junckers proposals would be a political signal to Washington and would not be the formal beginning of negotiations, which would have to be approved by EU countries.

“Trumps objective is that there are two big blocs: The United States and China. A multipower world with Europe as a strong player does not fit in” — French government official

European ambassadors will meet on Wednesday to discuss the scope of Junckers offer — and indeed whether any offers should be made at all. Frances official position is that Europe must not strike any deal with a gun to its head, or with any country that has opted out of the Paris climate accord, as Trumps America has done.

While Berlin is terrified by the prospect of 20 percent tariffs on cars and is desperate for a ceasefire deal, France has more fundamental suspicions that the time for compromise is over and that Trump simply wants to destroy EU unity. Paris is concerned that Trumps next target is its sacred farm sector and is putting more emphasis on the importance of preserving a united political front against Washington.

Two diplomats said Berlin has a broad menu of offers that should be made to Trump: a bilateral deal to cut industrial tariffs, a plurilateral agreement to eliminate car duties worldwide, and a bigger transatlantic trade agreement including regulatory cooperation that potentially also comes with talks on increasing U.S. beef exports into Europe.

Making such generous offers is contentious when Trump crystallized his trade position toward Brussels on CBS news on Sunday: “I think the European Union is a foe, what they do to us in trade. Now, you wouldnt think of the European Union, but theyre a foe.”

This undiplomatic bombshell came not long after he reportedly advised French President Emmanuel Macron to quit the EU to get a better trade deal than he was willing to offer the EU28.

In announcing Junckers visit on Tuesday, the White House said that he and Trump “will focus on improving transatlantic trade and forging a stronger economic partnership.”

Talking to the enemy

Diplomats note that a French-led camp in Brussels reckons Trumps goals are strategic, and that hes not after the sort of deal Germany is offering.

A French government official said that Washington quite simply wants to shift the EU off the stage: “Trumps objective is that there are two big blocs: The United States and China. A multipower world with Europe as a strong player does not fit in.”

Frances Economy Minister Bruno Le Maire this month also issued a stark warning that Trump is seeking to drive a wedge between France and Germany — courting Paris, while simultaneously attacking Berlins trade surplus with the U.S. “In this globalized world, European countries must form a bloc, because what our partners or adversaries want is to divide us,” Le Maire said at an economic conference in Aix-en-Provence. “What the United States want, thats to divide France and Germany.”

Despite these remarks from Le Maire, Anthony Gardner, former ambassador to the EU under the Barack Obama administration, said that he suspects the full magnitude of the threat has not sunk in. “Europe wake up; the U.S. wants to break up the EU,” he tweeted on Sunday. “Remember Belgiums motto: Lunion fait la force. [Unity creates strength]. Especially on trade. No side deals.”

One EU diplomat insisted that Brussels is not blind to these dangers in the run-up to Junckers visit.

Trumps opposition to the EU partly builds on a long-standing American discomfort about the EUs economic policies.

Trump thinks that Europe is “too big to be controllable by DC, so its bad for America. Simple logic. And therefore the only deal that will bring the president to stop the trade war is the deal that breaks up the European market. I dont quite think thats the legacy Juncker is aiming for,” the diplomat said.

Europe is source of a deep frustration for Trump, as it runs a massive goods surplus with the U.S., at $147 billion in 2016. In particular, the U.S. president blames Germanys mighty car exporters for this imbalance.

Leveling the field is not easy, however. With its market of 510 million consumers, Europe not only has the clout to stand up to the United States, but is increasingly setting global standards — particularly on food. This not only limits U.S. exports in Europe but also means that the European model is used in a broader trading ecosystem that includes Canada, Mexico and Japan.

New world order

Marietje Schaake, a liberal Dutch member of the European Parliament, observed that the U.S. trade strategy meshed with Trumps political agenda.

“You could say theres a new transatlantic relation emerging, of nationalists, populists and protectionists,” she said, pointing out that Trumps meeting with Russian President Vladimir Putin has cast doubt on Americas commitment to supporting European security.

Trumps opposition to the EU partly builds on an long-standing American discomfort about the EUs economic policies.

“We already saw problems during the negotiations for the Transatlantic Trade and Investment Partnership, where the U.S. didnt like EU demands such as on geographical indications [food name protections], and certainly didnt like that we had ambitious requests in areas like public procurement,” said Pascal Kerneis, managing director of the European Services Forum and a member of the now defunct TTIP advisory group.

Kerneis said that Trumps trade attacks are shifting the tensions to a completely new level: “Hes attacking on all fronts, hoping to break our unity, particularly between Germany and France.”

France particularly fears that Trumps duties on Spanish olives could only be the first salvo on Europes whole system of farm subsidies.

EU lawmaker Schaake said that France is right to worry about a conflagration. “Once we give in in one area, he will attack at the next one,” she said. “If we allow Trump to play Europeans against each other, sector by sector, it will be a losing game.”

Read this next: 9 ways to deal with Donald Trump

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