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Has Biden started a trade war against the EU?

2022-12-02 | EU
Has Biden started a trade war against the EU?

After pushing a war and a policy of sanctions against its main energy supplier that has left European industry out of the global competition, the US starts an open trade war against the EU and fuels the imperialist conflict between France and Germany.

What is the "IRA"?

VW factory in Querétaro

Volkswagen plant in Querétaro, Mexico.

The IRA -Inflation Reduction Act 2022- is the law, promoted by Biden, which materializes the new protectionist consensus promoted by Trump.

The law distributes funds and advantages among national companies with the excuse of reducing inflation, reducing the competitiveness of the products of foreign and even American companies manufactured in Asia, Europe or South America.

For example, electric cars assembled in U.S., Canadian and Mexican factories, for example, will enjoy a tax exemption of up to $7,500.

In principle, in view of the investments of the German automotive industry and its ancillary industry -partly Spanish- in Querétaro, this should not have a major negative impact. However, as these chains include pre-assembled parts in the EU, the final product is explicitly excluded from the tax advantages.

Is the "IRA" the starting point of a trade war between the US and the EU?

Everything points to that. The US is well aware that the IRA violates WTO rules. According to The Economist "a transatlantic trade rift is brewing" because the Americans are determined to go ahead and "understand Europe's frustration, but are unapologetic."

The consequences are dire for Europeans. The new Volkswagen CEO has been blunt: European capital in general and German capital in particular are losing the electric car race and, very regrettably, will have to move capital originally intended for investment on the continent to the protected markets of North America and Asia.

In recent weeks, several European industrial giants have revealed plans to invest in the U.S., rather than at home. Who can blame them?

Energy has become much more expensive in Europe , especially since Russian tanks rolled into Ukraine in February. One reason is that Europe has agreed with the United States to impose tough sanctions on Vladimir Putin's regime, which has led Russia to cut off almost all gas deliveries.

Europe suffers much more from this than the land of the free and home of the frackers. European politicians are irritated that European factories are threatened not only by Russian revanchism but also by Uncle Sam's subsidies. The United States and Europe are close allies geopolitically. Economically they increasingly see each other as enemies.

The Economist

What was the response of the EU powers?

Brussels responded immediately. The French Internal Market Commissioner, Thierry Breton, threatened to "go to the WTO" and propose "retaliatory measures". The French Finance Minister, Bruno Le Maire, proposed to respond with "European preferential measures or to accelerate the use of reciprocity instruments" against U.S. products. He concluded by affirming that France wants "Europe, and not only the United States, to emerge stronger" from the crisis on the continent, that is to say... from the war against Russia, the undeniable backdrop to all this.

But Germany, as we have seen, the main victim of the IRA, soon dissociated itself from the French indignation.

After joining the French thesis, the government of Olaf Scholz has turned and left the government of Emmanuel Macron alone. The reason for this shift is precisely the war in Ukraine. According to Berlin, with Europe mired in its worst war since World War II and more dependent on U.S. military aid than at any time in the last three decades, it would be irresponsible to seek a deterioration of transatlantic trade tensions.

What is Germany playing at?

Scholz proposes a re-Germanized EU

Scholz to present his plans for EU expansion and reform in Prague this August.

The question is obvious: what does Germany, which is willing to sacrifice a good chunk of its automotive industry and its available capital, expect to gain from the U.S.?

Already in October, the postponement of the bilateral summit with France sent out signals that Germany was taking a gamble it considered decisive with the subtlety of an elephant galloping through a bazaar. The desperation is understandable: Germany is the big loser in the Ukrainian war.

1. An EU internal market structure subservient to German capital

Its reluctance to intervene in the gas market after having covered itself with a 200 billion plan and reorganized the energy structure of the entire continent overnight to ensure the solidarity of the rest of the European countries in case of depleting reserves, loudly and clearly demonstrated the direction it is going: to rearrange the EU from head to toe according to the direct needs of German capital.

2. A European military strategy subordinated to the US

The Germanization of the continental economy would however be accompanied by a greater subordination of military alignment to the US as was seen with the German proposal to finance a European anti-missile shield within NATO... which would definitively put an end to the project of a European army promoted by France.

In fact, it would not only definitively abort the famous European autonomy: Germany is considering buying technology from Israel and is already making purchases of fighter planes and Patriot missiles from the US. In other words, Germany is undermining the project of a Europe of Defense, i.e. the objective of creating, hand in hand with France and with Italy and Spain as secondaries, a circuit of accumulation based on a shared arms industry.

3. An enlargement of the EU that puts an end to the French counterweight and the veto thus undermining the negotiating power of the "rebel" states.

The picture is completed by an enlargement subject to reform of the EU treaties which would end the right of veto in the Council on key issues. The end of the unanimity requirement would mean almost automatic German hegemony over foreign policy, energy or the possibility of disciplining member states.

This is obviously not a plan to anyone's liking, except Germany itself. But the eastern countries, with the exception of Hungary and perhaps Poland, could agree to lose much of their bargaining power in exchange for an enlargement they consider vital to ensure permanent bellicosity against Russia. Or so Scholz hopes.

Why does it clash with France?

For the French ruling class, the development of this strategy would mean the definitive "hijacking of Europe" by Germany. A finished version of the 1996 eastern enlargement. Germany would be left as a US delegate power for Europe.

In France it is clear that it would mean the "final demolition of Gaullism", i.e., the idea of an autonomous foreign and military policy (i.e., an imperialist orientation) for France (and thus to any other national capital). And in fact, even in Great Britain the idea is clear that an eastward enlargement would mean today a greater subservience of the EU to the US and not only a greater German regional power.

Trying to soften the resistance of the Elysée, Germany has accepted to launch joint armament projects and to invest on the European military-space race. But aware that at this point the only possible arbitrator is Biden, Macron and the French press are playing at exploiting the only argument left to them: the German reluctance to isolate China.

What does Macron's trip to Washington have to do with all this?

Macron and Biden during Macron's visit to Washington, D.C.

This was the real purpose of Macron's visit to the US: to make it clear, especially to the rest of the EU, that the US will not support German plans as long as they are opposed by France. His speech stating that "allies do not mean aligned" and that his goal was to "resynchronize agendas", paved the way for this. Especially since Macron knew perfectly well that he could not expect any substantial Europe-friendly reform of the IRA from his visit to Biden.

The US knows that it cannot entrust Europe to Germany and expect a close alignment against China like the one it hopes to obtain, so, evidently it is going to play the politics of sowing discord. That is why the State Department insisted that Macron's reception in Washington is "an honor granted to France above any other European country."

Because if Biden has given Macron the honor of a state visit, it is because the United States considers France the leader of Europe. It is a geopolitical tectonic movement, which is not only due to the personality of the French president, but also to Washington's perception of the Old Continent. Britain has marginalized itself by leaving the European Union and, until the Second Coming of Queen Victoria, expected by Brexit supporters, which will allow the restitution of the British Empire, London will have to assume that its capacity of influence in the United States, although great, is not what it was.

And then there is Germany, a country with a much larger economic than political role, but which has seen its stature diminish with Chancellor Olaf Scholz's constant vacillations and steps back and forth on the Ukrainian war.

El Mundo

Macron responded, as was to be expected, to Biden's gift with statements on China's challenge to the international order that have scandalized Beijing, discomfited Berlin and delighted Washington. In the triangle between France, Germany and the United States, each tries to sow the discord between the other two.

Which Europe does the USA want?

The US is recapitalizing its economy on account of the Ukrainian war and its consequences. Berlin and Paris, which are suffering the opposite, know it. And in fact, the French press highlighted in the wake of Macron's visit and despite the fact that no one had even hinted to the contrary that:

The Biden administration rejects false claims that the U.S. is the profiteer in the war in Ukraine, particularly in the energy field.

Le Monde

Excusatio non petita, acusatio manifesta. But Biden's strategy has all the appearance of being much more ambitious. From the outset, the US seems to be conducting this war more against Europe - which it is making more and more dependent and eliminating as a competitor - than against a Russia that it has unceremoniously thrown into the arms of China.

It is hard not to see the continuity between the US drive for war with Russia - refusing to negotiate that Ukraine remain outside NATO without nuclearizing -, its insistence on dragging its European partners into a policy of suicidal sanctions on European industry and the IRA.

  • The US wants a militarily and economically dependent Europe that cannot act as a competitor in its own market or play at displacing its capitals in Latin America, Asia and, to a lesser extent, Africa. And it is not going to stop. The trade war is underway and unstoppable.
  • The question is how long can an EU living in perpetual internal conflict, at war with its main suppliers and facing massive deindustrialization survive the US shake-ups?
  • For workers, the question is not about taking sides. Neither will U.S. workers "see good jobs come back" as Biden promises, nor do Europeans have anything to gain from an EU that coordinates the systematic attack on their most basic living conditions.
  • The real question is how to defend the needs of working people, which are the same in the U.S., the EU, Ukraine, Russia and around the world, from a system that is becoming more and more openly war-oriented. And for that, the first thing is to organize to defend ourselves against the attacks on our most basic living conditions that every day, country after country, fall upon us.