Germany is looking for a negotiated solution to trade and sanction disputes with the United States. France is using Brexit and colder U.S.-German relations to try to become the main intermediary between the United States and the European Union. Paris is also trying to use the current global environment to make progress on its long-sought goal of deeper European political and strategic autonomy.
The leaders of France and Germany are coming to Washington to make sales calls on America's top wheeler-dealer. French President Emmanuel Macron is scheduled to meet with President Donald Trump on April 24. Three days later, German Chancellor Angela Merkel will be stopping by the White House. Macron and Merkel are expected to discuss trade, Syria, Iran and Russia with Trump. As the leaders of the European Union's two largest countries, they are interested in improving U.S.-EU relations, but Macron and Merkel are not on the same page on several issues, which will make it difficult for them to present a united front. Furthermore, Macron sees an opening to position France as the main intermediary between the United States and the European Union, while Merkel is likely facing a cooler reception.
The Big Picture
In our 2018 Annual Forecast, we wrote that a pillar of the European Union's foreign policy this year would be the defense of free trade. This will be a central topic in upcoming meetings between French, German and American leaders. But trade is not the only component of U.S.-EU relations. While Germany is trying to prevent an escalation of trade disputes between the United States and the European Union, France is looking for opportunities to increase its diplomatic and military influence on global affairs.
Thwarting Exports
Trade is one of the main issues generating friction between the United States and the European Union. Shortly after taking office in 2017, the Trump administration mentioned Germany's large trade surplus as an example of what it described as unfair EU-U.S. trade relations. While the U.S. government has toned down its criticism in recent months, Berlin is still worried. After all, Germany's export-dependent economy has a lot to lose in a trade dispute with the United States, its main exports destination. Germany is also the largest steel exporter in the European Union, so Berlin wants the trade bloc to obtain a permanent exemption from recent U.S. tariff hikes on steel and aluminum (so far, the exemption is only temporary).
European Commission officials have warned that without a permanent EU exemption from the steel and aluminum tariffs, the bloc will introduce retaliatory tariffs of about $3.5 billion a year. Those fees would target U.S. exports such as agricultural products, clothing and motorcycles. But Germany wants to avoid this scenario out of fear that such a dispute could escalate and become like the one currently facing the United States and China. Even if a dispute over U.S. tariffs were raised at the World Trade Organization, which the European Commission is threatening to trigger, Berlin knows it could take years to resolve.
So Berlin's strategy is to seek a negotiated solution with the United States. Germany has shown a willingness to cooperate with the United States on cracking down on China's overproduction of subsidized steel, as well as to reduce EU tariffs on U.S. industrial goods, including cars and machinery. The German government is also willing to go beyond trade and has made gestures in other areas. For example, Berlin is becoming increasingly skeptical of a plan by the European Commission to change the way that digital companies are taxed. This change would affect U.S. tech giants such as Google, Amazon, Facebook and Apple Inc. While Germany was one of the original promoters of the reform, it is now willing to withdraw its support as a gesture of goodwill to the U.S. government. Without German support, the plan would probably be abandoned.
But Germany's strategy has limits. To begin with, Berlin cannot decide EU trade policy alone. Any changes on EU tariffs would require the approval of all 28 members of the bloc. For its part, the United States is unlikely to accept a narrow trade agreement that does not include issues such as a mechanism for the settlement of investor-state disputes. (That was a major point of friction during the U.S.-EU negotiations over the moribund Transatlantic Trade and Investment Partnership.) Even if Germany managed to kill the EU tax on tech giants, it would be a symbolic gesture and would not be enough to appease Trump.
More Money for the Military
The United States and Germany have also clashed over military spending. At 1.2 percent of gross domestic product, Germany's spending on its armed forces is well below NATO's target of 2 percent. The White House has repeatedly asked Berlin to increase its defense budget, but the topic is controversial in Germany, which for historical reasons is reluctant to use the military and tends to focus primarily on diplomacy.
This marks a deep contrast with France; Paris is considerably more capable and willing than Berlin to use military force abroad. Not only is France's spending closer to the NATO goal (1.8 percent of GDP) than Germany's, but it also sees its military presence abroad as a pillar of its foreign policy. This difference was clear during the recent punitive attack on the Syrian government. While France joined the United States and the United Kingdom in the missile strike against the government of President Bashar al Assad, Germany found itself in the awkward position of backing the attacks without participating in them. Against this backdrop, Syria will probably be one of the main topics during Macron's and Merkel's visits. The German leader is likely to offer to become a mediator between Russia and the United States in the conflict, while the French president will likely ask Trump to remain engaged in the civil war.
But France has requests for the United States that go well beyond the Syrian conflict. Macron wants continued U.S. cooperation in its fight against terrorist groups in Africa's Sahel. The United States already provides financial, logistical and intelligence support to France in the region, and Paris wants to make sure that this continues. France is already engaged on several fronts in Africa and other places, so cooperation from its allies remains essential.
Russia Sanctions and the Iran Nuclear Deal
Russia and Iran are also likely to be on the agenda for Macron, Merkel and Trump. The United States recently introduced a new round of Russia sanctions, targeting Russian entities and individuals and barring companies active in the United States from doing business with them. This restriction could negatively affect European companies. Considering that German companies are abundantly active in Russia, Merkel could ask Trump for an exemption from, or at least a softening of, the sanctions. German business lobbyists have already asked Berlin for protection against the U.S. measures.
The future of the 2015 nuclear agreement with Iran is also likely to be a point of contention. Germany and France, as well as the United Kingdom, are struggling to appease U.S. dissatisfaction with the deal while keeping it alive. As a gesture to the United States, they have proposed to introduce a new round of sanctions against Iran's ballistic missile testing and regional activities. They want the sanctions to be introduced before May 12, the day that Trump has threatened to lift the waivers on sanctions, which are a key part of the deal.
But Berlin, Paris and London have two problems. The first is that Italy and other EU members are reluctant to introduce new sanctions without U.S. guarantees that the nuclear deal will be preserved. The second is that the United States is critical of the so-called sunset clauses, which allow some of the limits on the Iranian nuclear program to start to expire after 2025. The Europeans believe that it will be hard to change these clauses without killing the agreement. As a result, negotiations between Macron, Merkel and Trump will be crucial for the future of the deal, and for the position of several EU member states on new sanctions.
French Ambition
While the current global environment may be full of challenges for the European Union, it also creates strategic opportunities for France. To begin with, the British exit from the European Union opens the door for deeper EU military integration, which has long been a French goal. The United Kingdom has been reluctant to back any EU plans that could run parallel to NATO's, but with Brexit, Paris now has a chance to advance its agenda. This explains its push to deepen cooperation among the bloc's armed forces through the Permanent Structured Cooperation (PESCO). From France's point of view, this is a way of enhancing Germany's military capabilities within a broader European framework.
And regardless of Brexit, Paris is also interested in keeping close cooperation with London. In January, Macron and British Prime Minister Theresa May agreed to continue working on global security, immigration and counterterrorism. They said that the Combined Joint Expeditionary Force, a Franco-British military force, will be fully operational by 2020. France also wants Britain to participate in the European Intervention Initiative, a defense cooperation framework that seeks to improve operational planning and coordination of military deployments among its member states.
Brexit also opens the door for France to become the main go-between for the United States with the European Union. For decades, the United Kingdom has used its strategic alliance with the United States and its EU membership to operate as a bridge. Now France is interested in taking Britain's place. From Paris' perspective, this relationship would strengthen its diplomatic position and give it a greater say in global affairs. The frosty relations between Merkel and the Trump administration — in comparison, under President Barack Obama, the White House fostered a close relationship with Berlin — only magnify this opportunity.
Paris sees Trump's criticism of NATO and his isolationist and protectionist rhetoric as a chance to make progress on its long-sought goal of strengthening Europe's political and strategic autonomy. Trump's confrontational foreign-policy style, Britain's Brexit problems and Germany's foreign policy constraints also allow France to boost its diplomatic influence in Africa and the Middle East.
Still, the United States and France are not fully aligned. Issues such as the Paris Agreement on climate change (from which the United States has withdrawn) still create friction between the two countries. But over the past year France has taken advantage of the opportunities created by the Trump administration, and similar windows will probably keep opening in the coming months. In the meantime, Germany's primary focus will be on trying to prevent its trade frictions with the United States from disrupting its economy.
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