Outlook for 2020: USA-EU trade dispute, decisive year in the relations NATO-Russia and new wave of refugees
With the agreement between China and the United States on December 13, the conflict between the two world powers seems to have lost its drama. At least that suggests the reaction of the world stock exchanges to the phase I deal. They post price gains worldwide. Nevertheless, the forecast institute Oxford Economics comes to the conclusion that a renewed escalation of the trade war remains the greatest danger for the capital markets in the new year.
Much of the phase I agreement between China and the United States remains vague, the essentials remain open, and only a few of the tariffs introduced are reduced. In the past two years, no major breakthrough has become real, and the Chinese have interpreted what the Americans thought they agreed differently. Nothing has been signed anyway.
Regardless of the actual importance of the Phase I Agreement, it is likely just a ceasefire with China, and then, after re-election, Trump may begin a Phase 2 and Phase 3 trade war against China, and should it not accept Trump´s America First long-term condition to be world power No. 2 a Sino-American war and a sea blockade based on the TX Hammes Offshore Control model as a continuation of the economic war with military means according to Clausewitz may be the result. But at the moment the Europeans have cause for concern because the Americans now want to turn to them. In the new year, they could be at the center of the trade war.
A warning shot for Europe was an interview by Robert Lighthizer at Trump’s favorite Fox channel this week. The trade commissioner, who also negotiated the deal with China, made it clear that the Americans are bothered by the European trade surpluses vis-à-vis the United States. They should add up to $ 180 billion this year.
In this context, Lighthizer spoke of a “very unbalanced relationship”. There are many barriers to trade with Europe and many other issues that need to be addressed: „It is very important to deal with Europeans, and the President is now focusing on them,“ said the US Trade Representative.
After the Trump-USA renegotiated NAFTA in his favor, the phase 1 agreement with China is only a short ceasefire with the Chinese before the elections and the Trump-USA is now concentrating on the World Trade Organization, blocking its arbitrary bodies, opening it up for the front against the last central success project of European industry policy, the Airbus for the own icon of American aviation industry Boeing, which has been hit by plane crashes, urge the Europeans to take US 5 G technology instead of Chinese Huawei and, in addition, the Northstream 2 project is now being attacked. In addition, the USA tries to portray the Northstream 2 project as the German First project, although there was an EU decision after France’s objection, which approved the project, especially since France afterwards also agreed to the compromise.
Gazprom’s EU advisor, Dr. Alexander Rahr believes that the US intends to divide Europe in energy matters, with Western Europeans preferring Russian gas, Eastern Europeans US LNG gas. Nevertheless, the question arises where the Eastern Europeans have so far obtained their gas from and whether they are willing and able to buy more expensive US gas in addition to increased NATO armaments expenditure and also to invest billions of dollars in the necessary infrastructure. Rahr also believes that the Trump-USA would give up NATO in favor of some core defense key states, such as Great Britain, Romania, Poland, and Bulgaria. After Trump protected NATO against Macron’s European plans and accusations of brain death, most Europeans don’t seem to share this view. It is significant, however, that Trump does not start a new trade war with the entire EU for the time being, but above all tries to attack Northstream and thereby portray the Germans as real parasite and enemy.
The advocates of Nordstream 2 reject the argument that this project makes Europe dependent on Russia in terms of energy issues by pointing out that Europe is already dependent on Russia in terms of gas and oil supplies, so this project does not produce the current dependency. Furthermore, reference is made to the fact that even the Soviet Union never ceased its energy supplies under communist rule, although the confrontation was much more extreme and Putin would risk the bankruptcy of his own state budget in the event of an embargo, which he had no interest in.
Furthermore, there is still no European Energy Union, which was so passionately demanded in Sunday speeches after the last Ukraine gas crisis. Especially the higher economic and ecological costs for US LNG fracking gas together with the enormous investments for the associated infrastructure are brought as an argument, as well as that Germany’s energy transition needs the Russian gas quickly, because the construction of power lines for renewable energies, above all wind power from the North Sea is not making good progress due to construction delays and civil lawsuits, only 800 kilometers of 6,500 kilometers have been built, and the energy transition threatens to fail without fast Russian gas and there could be blackouts after the shutdown of nuclear and coal power. In addition, Britain and Norway’s North Sea oil reserves will dry up in the foreseeable future and most Europeans, especially Germany, have long since become independent from the Greater Middle East energy supplies since the oil price shock and OPEC boycott in 1973.
The German energy transition could fail without Russian gas. That is why the Greens are at odds over this question, and Greens like Jürgen Trittin are speaking up and are calling for German and European sanctions against the USA as a countermeasure for their sanctions against Northstream. Die-hard core transatlantists, in turn, would favor both the 2% NATO benchmark and US LNG as the price of good overseas relationships. The German and European economy associations are divided about Northstream 2. Leading business circles fear that the US could expand the trade war beyond Northstream 2 against all of Germany and the EU, and consideration is being given to accepting US LNG and a stop to Norsthstream 2 as a price if the US would nor imposes punitive tariffs on the German and the European auto industry, mechanical engineering, aerospace industries and other sectors.
However, some also argue in reverse that such appeasement would only make Trump lick blood. Conversely, the Russian trade is just 5% of German foreign trade, while the USA, China and the EU remain the main markets and Trump so far has only called for Northstream 2 to be stopped, but not for other Russian energy supply projects and projects for Europe and not yet declared a trade war against the EU. However, there are fears that giving in to this question could be an example and could lead to further demands. However, a trade war against the EU might be relatively short and not that extensive as Trump´s main object is China as the real challenge for the America First No. 1 position of a world power and not the EU. In addition, the question is to what extent Trump will wage a trade war against the entire EU or not concentrate more on Germany as the leading power of the EU because he hopes to divide the Europeans, as Putin and Xi-China do. A trade war with the EU or, above all, Germany could also lead to a relatively quick agreement like the renegotation with NAFTA or Japan , especially since the EU cannot be a central state like China, the world’s number one powerhouse, especially since no European military will replace US-led NATO in short or even midterm and the EU is also no high-tech power that has a Made in China 2025 and could become a serious high-tech superpower in terms of artificial intelligence, quantum computers and essential disruptive future technologies in the foreseeable future.
It also depends on how Russia behaves now. The signals between Russia and the West are currently mixed. On the one hand there was the Ukraine Summit in the Normandy format between Germany, France, Russia and Ukraine, which ended in a compromise, which has yet to be implemented. At the same time, a Ukraine-Russia gas deal was brokered through the EU, which was demanded by the Northstream opponents as a condition so that Ukraine would not go bankrupt due to missing transit fees. Especially since Ukraine has just received an IMF loan because it is financially tight. Gazprom’s EU advisor, Dr. Rahr, believes that the Trump-USA is not interested in financing a bankrupt Ukraine, which can also be seen as a geopolitical statement and Putin’s calculation that it would then have a free hand in Ukraine.
It is striking that Putin personally inaugurated the railway bridge to the Crimea immediately after the Ukraine summit and the Ukraine-Russia gas deal, which the EU legitimately protests, as this continues to question Ukraine’s territorial integrity and cemented the status of Crimea as Russian territory. At the same time, after the Russian deployment of medium-range missiles and after the USA canceled the INF treaty, the United States was testing a new medium-range missile, emphasizing that it was tested only with conventional warheads. In addition, the NATO Secretary-General has now proposed to hold new talks with Russia, prompting Putin to say that NATO has expanded its aerial reconnaissance vis-à-vis Russia, while NATO emphasizes that Russia has increased its flight maneuvers to the NATO border and that there were also reports on Christmas time about increased Russian submarine activity in the Baltic and North Seas around the Northstream area. Now Putin is also talking about „anti-Russian tendencies“ in NATO. Right now saber rattle and testing positions. But should this not change. both sides could quickly slip back into a New Cold War. It would now be time to come to a settlement in Ukraine and to restart talks about an arms control agreement. Putin should take advantage of the NATO Secretary General’s offer of talks.
If the year 2019 was mainly characterized by the topics of the trade dispute between the USA and China, as well as climate protection, Greta and Friday for Future, in 2020 the topics of possible trade disputes between the USA and the EU, the relations NATO- Russia and a new wave of refugees might be the main issues. It remains to be seen to what extent the dispute over Northstream 2, Airbus and Huawei will then further expand into trade war bewteen the USA and the EU.
Tensions between Russia and NATO are also increasing and it will be important whether Putin accepts the NATO Secretary General’s offer of talks or whether the conflict continues to develop in the direction of the New Cold War and mutual rearmament. Interesting in this context is the announcement by the Secretary of Defense of the United States to reduce its worldwide commitment, which already began with the US withdrawal from Syria and Afghanistan, especially since the Trump administration is trying to cope with the exploding US public debt. It remains to be seen to what extent this will affect NATO’s presence and relations with Russia. Especially since 2020 is also the year of a US presidential election campaign, all of these discussions and decisions will take place in an emotionally polarized atmosphere.
The situation in Syria, Algeria, Libya and Iraq is also worrying. The Arab Spring is in its second phase and the fermentation processes are far from over, as a new wave of refugees could be coming to Europe, if Russia and Turkey don´t come to an agreement about spheres of influence in Syria and Libya, which could bring the unprepared EU back into old disputes about refugee policy and give right-wing parties a boost. After his invasion of Syria and the final battle for Idlib, NATO partner Erdogan now wants to send troops and warships to Libya to expand his neo-Ottoman empire, especially since the fight for natural gas reserves in the Mediterranean is gaining momentum and the USA is pulling out of West Africa and the rest of the world in the fight against terror, which will give the Islamists a boost.
A glimmer of hope is Iran’s declaration to contractually assure the United States that it will not develop nuclear weapons and then the Iranian foreign minister’s meeting with Houthi rebels in Oman. There seems to be some movement in the Iran conflict, although one should always be careful with overly optimistic forecasts.
And it remains to be seen whether China intervenes in Hong Kong or does something in the South China Sea, or is now rather glad that it is currently no longer on the US radar after the breathing phase in the trade war with the USA.