US and Europe drift toward trade war

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US and Europe drift toward trade war
12 March 2010

In the wake of the financial crisis that erupted in 2008, leading
capitalist nations and blocs of nations are employing increasingly
aggressive forms of protectionism to advance their interests.

The issue of protectionism arose sharply this week when the European
aviation company EADS announced it was abandoning its bid for a $35
billion contract to build 179 tanker jets for the US military.

Politicians in Berlin and Paris angrily accused the administration in
Washington of protectionism in favour of Boeing, the leading US
manufacturer of military planes. One leading member of the German Free
Democratic Party, part of the ruling coalition in Berlin, called upon
his government “to pressure the United States to cease its
protectionist tendencies.”

Others were even more blunt. Joachim Pfeiffer of the Christian Social
Union, another partner in the German coalition government, fumed:
“This is a scandalous, unacceptable act. This needs to become a
political issue with the USA.”

Garrelt Duin of the opposition Social Democratic Party declared, “This
is a sleight of hand on the part of the Yanks… The Americans only talk
about free competition when it is to their advantage. You can’t simply
change the rules of the game just because you don’t like the winner.”

For its part, the French Foreign Ministry sent a threatening letter to
the United States on Tuesday warning that Europe would “consider the
implications” of the Pentagon’s decision to favour Boeing over the
European consortium EADS.

There can be no doubt about the use of protectionist measures by the
US administration. They have been a hallmark of the administration led
by President Barack Obama, backed by his allies in the trade union
bureaucracy. However, the complaints being made by European
politicians are utterly hypocritical.

A number of media commentaries have made clear that America, Europe
and individual nations within Europe have for many years jealously
guarded the interests of their own defence industries. Only days ago a
number of European countries agreed to free up €3.5 billion to enable
EADS to complete the construction of the A400M military transport.

The German Handelsblatt wrote: “The common transatlantic defense
market is little more than an illusion… In fact, Europe doesn’t really
have an open defense market… The Germans, Brits and French guard their
domestic defense industries very closely, hindering public bidding
processes and mergers.”

Differences between the Atlantic partners are not restricted to the
sphere of military contracts.

Another growing rift emerged this week with the announcement by
leading German and French politicians that they favored the
establishment of a European Monetary Fund. Against the background of
the European debt crisis, German Finance Minister Wolfgang Schäuble
called for such a European fund, quickly adding that it would not
represent a rival to the US-dominated International Monetary Fund. But
it is well understood that a European Monetary Fund would, in fact,
represent precisely that. One comment in the Financial Times summed up
the feeling in European political circles: “The thought of Washington
bailing out a eurozone country is intolerable.”

The plans for such a European fund are in their early stages and there
are influential politicians and financial interests in Europe that are
opposed, but the thinking behind the project is clear. Leading
European nations, with Germany to the fore, are seeking the same
powers to override the national sovereignty of individual countries
and impose drastic austerity programs as those exercised by the
IMF—but without the interference of the United States.

Similar considerations lie behind the recent announcement by the
French and German governments they are contemplating measures to
prevent various forms of speculation, such as credit default swaps and
short-selling against currencies and government bonds. The objections
being raised in European capitals against such forms of speculation
are not based on any principled opposition. The governments in Berlin
and Paris were quite willing to provide hundred of billions of euros
to their respective banks to cover their losses from such practices.
Their main concern is the predominance of US banks in this field and
their ability to wreak havoc on the euro. Some minimal legislation,
they have concluded, could assist in preventing American financial
interests from unduly intervening in European financial affairs.

The war of words over the collapsed EADS contract and tensions over
Wall Street manipulation of European markets are only the latest in a
series of far-reaching political and economic conflicts between Europe
and its biggest trading partner, the United States.

At the start of February, European political circles expressed
consternation following an announcement by the US State Department
that President Obama would not be attending a major European Union
summit planned in Madrid for May.

On February 11, the European parliament voted against an agreement
that would have allowed American investigators access to European bank
data transfers via the SWIFT network. American officials reacted with
shock to the decision.

The list of contentious issues between the transatlantic partners
could be extended to include the Afghanistan war, environmental
policy, and the US response to the earthquake in Haiti.

Further conflicts are looming in the sphere of trade and economic
policy. Europe is currently preparing to sign a number of free trade
agreements with Asian countries. Summing up the European strategy
recently, the European trade commissioner deplored the fact that
Europe had been unable to transform its economic power into political
influence, and laid out the continent’s priorities for the immediate
future: “India, Canada, Ukraine, Latin America, the Mediterranean area
are likely to dominate our agenda over the next two years … together
with upcoming talks with Singapore and the updating of our trade
relationship with China.”

The same race for markets and raw materials is being pursued by
American big business. Major confrontations between European and US
interests in these regions are inevitable.

For over five decades following the Second World War, a firm political
partnership between the US and Europe based on a strong America and a
weak Europe was the bedrock of relative stability in the Western
Hemisphere. This partnership is now rapidly unraveling. The post-war
industrial powerhouse of America has long since been in decline, and
Europe, led by Germany and France, is increasingly flexing its
political and military muscles.

Protectionism and trade war are the invariable response by the major
capitalist powers to the deepening crisis. The cheerleaders for such a
policy are the trade unions and social democratic bureaucracies. Their
promotion of economic nationalism is inseparable from their support
for brutal austerity measures by their respective governments against
the working class.

The fault lines which led to two world wars in the last century are
still in place. The only means to prevent trade war from once again
turning into armed conflict between nations is the independent
mobilization and unification of the working class on the basis of a
socialist and internationalist perspective.

Stefan Steinberg

http://wsws.org/articles/2010/mar2010/pers-m12.shtml

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