38 Europe The EconomistSeptember 14th 2019
“T
his is deeplyoffensive,” declares Cecilia Malmstrom, ges-
ticulating around her orchid-lined office in the European
Commission’s Berlaymont headquarters. “We have colleagues
here whose parents fought together [with the Americans] on the
Normandy coast and we are a threat to national security?” The eu’s
trade commissioner is referring to Donald Trump’s imposition of
tariffs on European steel and aluminium, which he preposter-
ously claims is necessary for national-security reasons. The euhas
retaliated with its own tariffs on bourbon, Harley Davidson motor-
bikes and other iconic American goods.
This tit-for-tat does not come easily to Ms Malmstrom, a pro-
trade Swedish liberal. When she took office in 2014 the World Trade
Organisation’s (wto’s) Doha round of multilateral tariff reductions
was stagnant and European city squares thronged with protests
against the Transatlantic Trade and Investment Partnership (ttip),
a mooted trade deal with America. Since then the drawbridge-up
tendency has surged: first in Europe, with wins for nationalists
and Britain’s vote for Brexit, and then in America with the election
of Mr Trump.
Ms Malmstrom has been one of the stars of the current com-
mission, which will leave office at the end of October. ttipmay
have vanished from the agenda—its prospects looked poor even
before Mr Trump’s election, thanks to America’s Democratic
Party—but elsewhere the euhas implemented bilateral deals with
15 additional countries, including Canada and Japan. It has also
updated existing trade deals with Singapore, Vietnam, Mexico and
clusters of countries in east and west Africa. An agreement with
Mercosur, the Latin American bloc centred on Brazil and Argenti-
na, is awaiting ratification. Exports from the euhave increased by
about 15% over the past five years.
How has all this happened? Three factors stand out. First, the
eu’s size and strongly pro-trade stance make it a formidable force.
In Japan, Canada and Latin America the trade commissioner has
found like-minded interlocutors who share the eu’s commitment
to free trade and are smaller than the eu(and therefore relatively
pliant negotiating partners). Second, the euhas maintained the
buy-in of its own citizens. Ms Malmstrom has insisted on trans-
parent negotiations, has involved the European Parliament andhas imposed European social and environmental standards on the
eu’s partners. “I’d say we are the most transparent trade negotiator
in the world,” she insists, noting that: “There were strikingly few
protests against the eu-Japan deal.” Guntram Wolff of the Bruegel
Institute, a think-tank, points to a related eustrength: its relatively
generous welfare states cushion citizens from the negative effects
of trade and thus curb anti-trade sentiment. Finally, Mr Trump has
concentrated minds. The president is broadly disliked in Europe,
and in the countries with which the euhas done deals. His anti-
trade message has blunted domestic opposition to those accords.
It has also made elites in other parts of the world keener to seek ref-
uge in Europe’s giant economy.
All three of these factors are now under strain, creating three
big problems for Phil Hogan, her nominated successor as trade su-
premo in Ursula von der Leyen’s incoming commission. At the top
of Mr Hogan’s in-tray will be talks not with smaller, friendly pow-
ers but with big, difficult ones. Ambitions for the next few years in-
clude an investment agreement with China (which continues to
demand openness from others while shielding its own state-led
industries), a free-trade deal with India (whose protectionism has
stymied talks to date), a deal with a post-Brexit Britain (which re-
mains wedded to the notion of benefits without costs outside the
eu) and a deal to cut tariffs with Mr Trump’s America (already
threatening new levies on European cars and wine).
The domestic picture, too, is becoming harsher. The new Euro-
pean Parliament—which has a veto on trade deals—is more frag-
mented than the last. It contains a somewhat larger populist com-
ponent, and Mrs von der Leyen’s commission may in certain votes
be reliant on the flourishing Greens, who set a high bar for envi-
ronmental and consumer standards that even the eu’s trade deals
(green by international standards) may struggle to meet.
Finally, the marginal benefits for the eu of Mr Trump’s anti-
trade stance are drying up. In future, the American president may
make life for free-traders much harder. He could yet bring down
the entire wto, leaving the eureliant entirely on bilateral deals.
And his trade war with China could yet force the Europeans to pick
sides—something they are understandably loth to do.Time to take the lead
All of which will not be easy, concedes Ms Malmstrom, but can be
managed. Transparency and better measures to combat the nega-
tive effects of free trade can suppress European voters’ protection-
ist instincts. Internationally, she insists that “the eucan lead if it
has allies.” It has good friends in the likes of Canada and Japan;
deals with others such as Australia and India remain to be done.
The commissioner notes hopefully that American politicians and
businessmen continue to troop through Brussels preaching co-
operation. Even China, though cynical and defensive, does not
want the wtosystem to collapse, and might be willing to work
with the euto keep it alive or replace it if America walks out.
The biggest challenge will be psychological. The eudoes not
usually have to think much about the shape and character of the
world economy. That was America’s job: a reality rooted in a post-
war order whose emergence began with the Normandy landings
that Ms Malmstrom fears Mr Trump is forgetting. Yet today, with
the president cutting America off and escalating tensions with a
more assertive China, leadership is scarce. Under Ms Malmstrom,
Europe has acquitted itself pretty well. To continue to do so as the
going gets choppier will take a new self-confidence. The old conti-
nent must learn to lead. 7Charlemagne Choppy waters
Times are getting tougher for the world’s leading free-trader