Wednesday, June 25. 2008
Making Transatlantic Economic Cooperation More Interesting
Posted by Nanne Zwagerman in Transatlantic Relations on Wednesday, June 25. 2008
Transatlantic economic cooperation is a process that produces winners and losers and thereby has political implications. As it deals with economic relations between the world's two largest economies by far, these implications will likely prove to be significant. The cooperation process, however, is technical to a degree where the political implications are likely to be registered late, and to lead to oblique reactions.
At the core, being 'dull but important' is a dilemma, which has to be solved by making transatlantic economic cooperation more interesting. This could for instance be done by clarifying the political implications of very technical issues like eliminating 'non-tariff barriers'. That, however, is a very difficult analysis to make, and will be contested.
Another solution is to make the issue more interesting by addressing more strategic and political issues. That is the proposal of Henning Meyer of the Social Europe Blog, in a policy paper written for the Global Policy Institute.
The paper starts out by describing the transatlantic economic relationship, and the history of transatlantic economic cooperation. This history runs from President Kennedy's 'Declaration of Interdependence' to the current 'Framework for Advancing Transatlantic Economic Integration' (FATEI) - launched in 2007. There has been a progressive institutionalisation of the process, resulting in "political ownership at the highest level" in the form of the Transatlantic Economic Council (TEC).
Henning Meyer faults the process for not dealing with major strategic issues, like the Airbus - Boeing conflict, or the financial crisis that emanated from the USA:
But the transatlantic partnership still fails to address strategic issues. It seemed very odd for the second TEC meeting, which took place in Brussels on 13 May 2008, to discuss investment policies, accounting standards and the assessment of securities regimes without even mentioning the current financial crisis. Given that the origin of the crisis lies in the US and many of the negative effects materialized in Europe, a transatlantic economic council might seem to be the appropriate framework to address these issues but it was not to be.Meyer calls for the inclusion of such strategic issues, and also - principally - the inclusion of social and environmental issues:
In its current configuration, transatlantic economic cooperation is more likely to reinforce the negative effects of globalization because its narrow agenda does not take social and environmental requirements sufficiently into account. But this is not engraved in stone. With some political and institutional changes and strong political commitment, transatlantic economic cooperation could become a model for integrating economic, social and environmental concerns in a bilateral governance framework.Curiously, Meyer is of the opinion that the second half of 2008 will be a good time for making such arrangements. This is counterintuitive insofar as there appears to be a better than half chance that the next US President will be a lot friendlier to the inclusion of social and environmental standards in economic cooperation, and the current political leadership in Europe seems predominantly in favour of unrestricted trade.
Late update: In the comments, Henning Meyer notes that he did not propose making concrete arrangements, but rather to assess the relationship and debate the changes that are needed. The relevant part of his paper states "The second half of 2008 is the right time to discuss the future of the transatlantic economic relationship. Until the new US President takes office in early 2009, there is a window of opportunity to debate the problems currently associated with transatlantic economic relations." Correction noted, and thanks to Henning for pointing it out.
More interesting for whom? Since 2005 the US dollar is down 18%, the Euro was allowed to creep up uncorrected by about 30%.
WHile the Euro escalation was permitted to happen to raise public sentiment after those changing over to the euro realized lost purchacing power, this does absolutely nothing to give the Chinese a reason to float their currency on world markets for real, and otherwise not manipulating exports with written off loans. For humnan advancement, the matriculation of China into a state of bearing real responsibilities is key, and yet the ECB is undermining it.
The "Social Europe" paper misses out on so many levels, by describing the political framework and intended social which have been true for two decades, and are old hat, and really doesn't have a point. They do manage to indulge immusions about the US and EU having differing approaches to Jihadist terrorism, but include it for reasons only Pavlov's dog would understand, don't explain, and seem blind to what Europeans are doing about jihadist terrorism in Europe. For an institute that is funded by a coalition of [url=http://no-pasaran.blogspot.com/2008/05/its-probably-lifestyle-issue.html]Socialist parties across Europe[/url], this paper is a weak effort.
More imporant to everyone, ideally. Currency policy is also one of those strategic issues that should be discussed more deeply through the TEC, or an affiliated institution.
Suggesting that the depreciation of the Dollar and appreciation of the Euro (with regard to the Yuan) is caused by the ECB's deflationary policy and has nothing to do with reckless inflationary policies of the Fed is rather absurd. But there is still a lot of value concerted action to pressure Japan and China to float their currencies more freely.
Jerome a Paris of the European Tribune had [url=http://www.eurotrib.com/story/2008/6/24/93949/3506]a post yesterday[/url] with an instructive graph on the relations between the currencies.
Nanne, it seems to me you pose a paradox. The last post you made (about the Dutch saying that transatlantic decisions are no longer enough) implies that the terms 'transatlantic' and 'atlanticist' are obsolete. I agree - as a 'recovering Atlanticist' I've been arguing for a global diplomatic/economic/environmental perspective for a long time.
But I think most Europeans (and Americans for that matter) don't really understand what that means. The efforts of 'western' environmentalists try to strong arm the US into the Kyoto treaty betray they fact they don't really understand the 'global' part of things - somehow the US and Europe can (and should) solve the problem by themselves (by filing lawsuits in the US to protect the polar bear, signing treaties, etc).
We pretend to have a global perspective yet we continue to use terms like transatlantic like they mean something - like they don't cut out 75%+ of humanity from the discussion. Why
Don:
It's called working both sides of the street. The tone has a diplomatic sounding opening bid, but that's supposed to be the carrot from it there inevitably evolves a stick compelling some sort of concession. One always starts by trying to get someone else to do as much of the cooperating as possible.
The relationship between the currencies is what it is. Excluding the Euro and USD as comparatives (more specifically when you use the Renminbi), other facts emerge that no public call for cooperation will rectify.
[url=http://finance.google.com/finance?q=CNYEUR]EUR[/url] [url=http://finance.google.com/finance?q=USDCNY&hl=en]USD[/url]
I don't think Fed/ECB cooperation is the main event. Europe is an export based economy, and has more work to do with the Euro to price their goods to what the world market will bear. In fact as a net food exporter, the inflated contributes to the commoddities crisis - not as much as the rise in oil, but a 25% "tax" for holding something other that Euros is quite a handicap.
At the same time, higher margin European finished goods are mainly sold in the US and Canada, so they have a lot more to lose on the currency-imbalance front that the US does.
That's a very good point. Perhaps I'm still 'recovering'.
One justification is that the Doha round is still completely gridlocked, so we'll see more bilateral trade arrangements. So I think that this is an area that will continue to have some relevance.
The main problems both Europe and the US have with the environment and social concerns relate to trade with Asia, and not the bilateral trade relationship. So it would be rather unrealistic to hope for great payoffs in that area.
"current political leadership in Europe seems predominantly in favour of unrestricted trade."
Really? What about GM food? Hormones in meat? Is that policy goniong to change materially or is the game to remove US 'non-tariff' barriers while not removing European ones?
I would not trust the current politicians on GM food. The only thing that holds them back is overwhelming opposition from the population.
about laboratory meat, in Neederland, hormones or not hormones ?
http://www.reuters.com/article/scienceNews/idUSL3051670020070601?pageNumber=2
There is an irrational fear of 'frankenfoods' in much of europe. It is certainly possible to abuse GM, but mostly it hasn't happened. You need more boring beaurecrats to filter out the abuses and (much) less politicization of the issue than you have had.
Current European policies on GM demonise your best ally and friend in the world without gaining Europe anything but a spurious innocence.
It's true that the US needs to remove non-tariff barriers to European imports, but just as true that Europe needs to do the same. But when these barriers have been converted into a secular religion - as they have - that is going to be difficult to do. As your comments about not 'trusting' your government on this issue proves....
There may be an irrational fear that there will be grave health consequences for humans from GM food. However, I see fears with regard to leakage of genetic modifications into nature as more justified. In addition, most genetic modifications at this time are made to kill pests directly (Bt corn) or to allow more liberal use of pesticide (Monsanto's 'Roundup ready' crops). In addition, GM crops further extend an intellectual property regime over food which I think should not exist.
The Monsanto 'Roundup-ready' line was what I was thinking of when I wrote about 'abuses' of GM, but there is a question about how pervasive the regulation would be. refusing authorisation to use it in Europe is one thing, but forbidding import of food products from elsewhere which uses it (which Europe currently does) is something elese entirely. This is one of those 'non-tariff' barriers you decried earlier.
I agree - but elimination of these barriers cannot be a one-way process, Nanne. Given the demonisation in European newspapers of common US production processes removing these barriers is going to be politically difficult. And absent the European quo the US cannot be expected to give it it's quid.....
"doesn't belong in politics"
It occurs to me, this phrase will have different interpretations on different sides of the Atlantic.
In one interpretation, it suggests a laissez-faire approach: let private parties work out the terms of trans-Atlantic economic cooperation, using arbitration when they can't agree and involving government only in the last resort to resolve disputes.
In another, it suggests insulating the technocrats (i.e. regulators) from political pressures (due to populism, real politik, etc.), leaving them free to gather data, perform analysis, and proactively build a scientific system of trans-Atlantic economic cooperation.
The way to make the debate interesting, is to debate the political question in precisely these terms (laissez-faire vs. technocratic) and leave the details up to the "winner" which would be either the market or the government experts. Of course there would be no one winner across all areas of trans-Atlantic economic cooperation - it some areas we'd decide to let the market be the primary mechanism, in others we'd let the expert regulators have their day.
Instead we seem to be assuming that governments [i]must[/i] be involved in the minute details of cooperation. We seem to be limiting ourselves to asking (cynically) how can we "sell" the process to the people, or asking (optimistically) how can we improve the process by getting the public more involved.
Those of you who know me, know that I tend favor the market. Among the many reasons for this is, I believe free markets are the best way to assess the collective will of the people, except in matters involving the government's monopoly on the legitimate use of force.
The point I am trying when I wrote "doesn't belong in politics", that regardless of whether you favor laissez-faire or technocracy, I don't see any meaningful way to involve the public (meaning people acting in their capacity as voters and citizens, not people acting in their capacity of producers and consumers) in the minute, boring details of economic cooperation.
Even if the public (as citizens) could be involved in some way, they shouldn't have to be. Life is too short.
Oops...previous comment was supposed to be a top-level comment, not a response to Nanne re GM food.
But on that question of GM food, perhaps Nanne you've been following the debate over at Eurotrib re the EU, in fact, you've probably been following it for much longer than I have!
Still, I can't fathom: if even the experts can't be trusted to stop GM food, why are so many in favor of EU reforms that will increase the experts power at the expense of the popular will? GM food is only one example, human rights is another, and there are others. [url=http://www.eurotrib.com/comments/2008/6/19/16936/5336/24#24]I've expanded on this point at Eurotrib[/url].
The Lisbon Treaty would have provided some advances in the accountability and democracy of the European Union along with its increase in power. It's difficult to tell where the balance lies. Right now, I'd think it a very bad sign if it were somehow to be passed after Ireland has voted it down, but I don't think it's likely.
Dear Nanne,
just a quick correction to your post. I did not say that the second half of 2008 will be the time to make new transatlantic arrangements. What I argued was that the second half of 2008 is the right time to assess the state of the relationship and debate what changes are needed to put it on a broader basis. The implementation - if any - is only feasible with a new commitment by a new US president.
Best
Henning
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