Abu-Ghazaleh Shares Insights with Bruce Stokes on US – Europe: Together or Alone (3)

[21-03-2021 10:59 AM]

By Talal Abu-Ghazaleh

Dear Europeans, do not be fooled by your relief with the new administration in Washington. Your hope for the future of transatlantic cooperation is premature. To get the America you want will be more difficult for President Joe Biden to deliver than you realize. It will require tough love by Europeans. Just make sure your assertiveness is designed to bring the United States and Europe closer together, not drive a new wedge in the relationship.

Biden is committed to rebuilding transatlantic ties. But the recent insurrection in Washington is a sobering reminder of the divided America he inherits. Moreover, his electoral coattails were short. The Democrats barely gained control of the U.S. Senate and lost seats in the House of Representatives. Moderates, not progressives, will have the deciding votes on many issues of importance to Europeans. And the American public is deeply divided. Three-quarters of Trump voters incorrectly believe he won the election. And only 15% of Americans think that American democracy is working well.

This comes in the wake of an ambitious European Union agenda for transatlantic relations in the Biden tenure. And at a time when Europeans are engaged in a long-overdue internal debate about their own sovereignty and autonomy.

In pursuit of such ambitions, Europeans must realize that self-empowerment requires assuming the responsibility to prod or even pressure the United States to do what is in their mutual self-interest.

What European autonomy should not do is create trans-Atlantic divisions. Signing the EU-China Comprehensive Agreement on Investment in the waning days of 2020 was a dramatic assertion of European sovereignty, but it was an ill-timed first step.

It came at a moment when the incoming Biden administration had expressed a desire to work more closely with Europe in dealing with China. If Beijing’s concessions to Brussels temper European willingness to work with Washington on China, transatlantic cooperation will have gotten off on the wrong foot.

Going forward, European assertiveness should focus on initiatives such as leveraging U.S. climate action, taking on more responsibility for global economic recovery, and creation of a tax and regulatory framework for the digital economy. For all its good intentions, the Biden Administration will find it difficult to spearhead these initiatives. Europe will have to lead.

Biden will rejoin the Paris Climate Agreement on inauguration day. But the United States must also improve upon its commitments to reduce carbon emissions. Biden’s campaign pledge of net zero carbon dioxide emissions by 2050 requires big changes in the next decade. With Democratic Congressional majorities dependent on the votes of moderates from coal producing states, a meaningful tax on carbon emissions may be beyond reach.

Biden has also promised executive orders to impose higher fuel efficiency standards, to control methane emissions from fracking and to launch other regulatory initiatives to slow global warming. But, as President Trump learned, courts can block executive orders and the conservative Supreme Court seems poised to curtail the executive branch’s regulatory discretion.

Europe has no choice but to force Washington’s hand. It should impose a carbon emissions border adjustment price on products from the United States. This would give the Biden administration some much-needed leverage with its domestic climate change deniers who will then have to choose between paying a domestic tax on carbon emissions or see taxes on American exports fill European government coffers.

Biden has also promised major new spending to revive the economy to avoid a desultory economic recovery. In the wake of the 2009-2010 Financial Crisis, the United States experienced its slowest rebound in modern times, thanks to inadequate pump priming. Europe and the rest of the world suffered as a result.

IMF leader Kristalina Georgieva has called for more U.S. fiscal stimulus. But any Biden spending program will require higher taxes and more debt. His promise to raise revenue by increasing corporate levies and higher income taxes on the rich will face stiff opposition on Capitol Hill. Expect Republicans to rediscover their orthodox aversion to debt. And moderate Democrats up for reelection in 2022 may have qualms about more deficit spending.

This means the burden of global economic revival will rest more on European shoulders. Approval of the €750 billion European Union recovery fund was a good first step. But additional spending will be needed, especially by Germany. “Germany is in the…enviable position of having ample fiscal space”, Shekhar Aiyar, the IMF’s mission chief for Germany, commented late last year.

Finally, the digital economy is the circulatory system of the future transatlantic marketplace. The European Court of Justice invalidated the U.S.-EU privacy shield agreement, which permitted companies to transfer commercially relevant personal data from Europe to the United States. Without such a deal, the transatlantic digital economy could be crippled. The European Union should propose immediate negotiations on a new transatlantic privacy accord.

The Biden administration is expected to take a hard look at the anti-competitive practices of Facebook and other platform companies. More than half the U.S. states have already sued Google for alleged “discriminatory conduct on its search results page.”

The EU has proposed tougher new oversight of the technology industry. And, in the wake of Twitter banning Trump, Chancellor Angela Merkel asserted that regulation of speech on these platforms should be done by law, not by private companies. Brussels should push for a U.S.-EU review of platform companies, with a focus on competition policy and free speech. Closer coordination is needed before Washington and Brussels go down separate regulatory paths.

And, most immediately, the U.S. and European governments need to resolve their differences on digital taxation. The digital economy is woefully undertaxed at a time when governments on both sides of the Atlantic are desperate for revenue. If Washington continues to drag its feet in the ongoing OECD negotiations on this issue, European governments should impose their own digital taxes. This may be the only way to force an American debate about digital companies paying their fair share.

Leading European politicians from various parties acknowledge that there is no return to some pre-Trump time when America led, Europe begrudgingly followed, and all was right with the world. Trump is gone. But the United States is still a much-needed European partner. Yet, in the Biden era, Europe should practice smart tough love on a distracted Washington to get it to move on issues of mutual interest. Europe must have the courage of its convictions and play the unaccustomed role of big brother. This will not be comfortable for either Europe or America. But this is what Europeans’ longed-for sovereignty means in practice.

Bruce Stokes is the executive director of the German Marshall Fund’s transatlantic taskforce Together or Alone? Choices and Strategies for Transatlantic Relations for 2021 and Beyond

* Bruce Stokes is the executive director of the Transatlantic Task Force and senior fellow at the German Marshall Fund. He was the director of Global Economic Attitudes at the Pew Research Center in Washington, DC, and is a former international economics columnist for the National Journal, a Washington-based public policy magazine. He is also a former senior fellow at the Council on Foreign Relations.

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