FRONT PAGE - Hurricane Trump, Europe needs to step up
Trump has surprised everyone once again: he is doing exactly what he promised on the campaign trail, against the hopes of his opponents. And now the risk of a divided and protectionist America, feared by some, is no longer a mere refrain of the merchants of doom. It’s a nightmare reality. We will try to remain rational and explain why these initial moves by Trump could end up being detrimental to putting “America first”.
- Monday, 27 February 2017
1) The wall: a report by The Washington Post estimated the cost of building a 3,100 km long wall between the US and Mexico at $25 billion (€23.2bn). Trump insists that Mexico will pay for it, but the Mexican president has refused. Thus the wall will initially be built with American funding, and then? According to Trump, a 20% duty on Mexican imports will raise $10 billion (€9.27bn) per year. Forbes cal- culates that existing taxes on Mexican goods would have to go up by a factor of four to pay for the entire wall, even if the cost were spread over ten years.
2) For citizens from seven Muslim countries (Syria, Libya, Iran, Iraq, Somalia, Sudan and Yemen), entry into the US has been blocked for three months (to restrict terrorist activities), ignoring (!?) the fact that the perpetrators of at- tacks on US soil in this century came from Saudi Arabia, the United Arab Emirates, Egypt and Lebanon.
3) The imposition of a 35% tariff on imports from Mexico and 45% on imports from China as well as the abolition of the TTP and NAFTA (all cornerstones of Trump’s trade program) fail to take into consideration the fact that exports and imports are not easily separated.
Of the top 2,000 exporting firms in the US, 90% are also importers. And countries with which the US has made trade agreements are also its largest foreign markets: Mexico and Canada purchase over 30% of total US exports. Trump’s protectionism could therefore result in: a) a slowing of international trade flows (if NAFTA is abolished, there would be less demand for US cars in Canada and Mex- ico); and consequently b) a reduction in US production in favour of foreign manufacturers (to the advantage of Asia and South Korea in the automotive sector); c) job losses (-4.8 million jobs in the private sector, according to the Peterson Institute of International Eco- nomics); d) higher costs for US manufacturers (which without NAFTA would be unable to buy low-cost components imported from Mex- ico), and therefore higher prices for US con- sumers (producing an iPhone in the US could cost as much as $100/€93 more per unit).
This American neo-isolationism is an un- missable opportunity for Europe to move to- wards greater integration and a more signifi- cant international role, at least in a few areas. If Trump keeps his promise to curtail the role played by the US in NATO, the EU would be forced to proceed on the fraught matter of a common defence policy (an instance of the two-speed Europe promoted by Chancellor Merkel), which has excellent reasons for being implemented. According to data on de- fence spending gathered by the Stockholm International Peace Research Institute, the 12 highest-ranked countries in the world are: US 36%; China 13%; Saudi Arabia 5.2%; Russia 4%; UK 3.3%; India 3.1%; France 3%; Germany 2.4%; Japan 2.4%; South Korea 2.1%; Brazil 1.5%; Italy 1.4%.
Adding up the figures posted by France, Germany and Italy reveals that these three countries account for 6.8% of total defence spending worldwide. Together they rank be- hind the US and China but way ahead of Rus- sia. And if we factor in the other European countries, the EU outranks China and becomes second to the US alone. Why should we wait to become independent? It could be that the Trump hurricane will make the 60th anniver- sary of the Union one to remember.