Following Up: Germany’s Merkel on NATO and Defense May be Leading, but Could Lack Followers

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allies, Angela Merkel, Europe, Following Up, Germany, NATO, North Atlantic treaty Organization, Pew Research Center, polls, Russia, Trump

German Chancellor Angela Merkel, who’s not known as a bomb-thrower, at least chucked a pretty good sized grenade into newly volatile relations between the United States and the European members of the North Atlantic Treaty Organization (NATO).

Merkel told a crowd at a political rally today that “The times when we could fully rely on others have passed us by a little bit, that’s what I’ve experienced in recent days.” She clearly was referring to her experience with President Trump, a longtime skeptic of the Atlantic alliance, at NATO’s summit last week. And Merkel continued, “For that reason,” Merkel continued, “I can only say: We Europeans really have to take our fates in our own hands.”

These remarks don’t count as full-fledged bombs for several big reasons. First, as I noted in a recent post, the Trump refusal to endorse explicitly NATO’s Article Five pledge to aid militarily any member under armed attack might have the transatlantic foreign policy crowd in a state of hysteria, but the clause is ambiguous and German and other European leaders have always known – and fretted – about this.

Moreover, U.S. allies repeatedly have discussed creating a meaningful defense capacity of their own with varying degrees of independence from the United States. So far, they’ve never followed through – mainly because American leaders typically responded with renewed pledges of undying loyalty. So the allies understandably felt perfectly free to continue free-riding.

But let’s say that This Time It’s Different (and sometimes it is, otherwise, we’d have no history). What’s interesting to say the least is that Merkel is going to face some major obstacles with her own people and many others in Europe. How do we know this? Let’s simply look at that Pew Research Center NATO poll I posted on yesterday.

Now some sharp RealityChek readers may be wondering why I’m using this Pew data, since yesterday’s post demonstrated many fatal flaws. Here’s the answer: My criticism of Pew focused on its failure to inform American respondents that the nation’s NATO commitments created any risks. That’s important given how ignorant so many Americans remain about even major foreign policy realities, because they’re so physically isolated and insulated from the rest of he world.

But European publics – which were also surveyed by Pew, and whose views I’ll discuss below, are substantially different. After all, they live much closer to Russia, NATO’s main concern. So even if they’re by no means foreign policy experts, the continent’s war-torn past is something much more apparent to them, and especially to their parents and grandparents. Just as important, they’re the ones who will have to live with the worst consequences of poor governmental national security decisions. And if the views they expressed to the Pew researchers are representative, Merkel could well find it almost impossible to help create an independent European defense effort worthy of the name.

Interestingly, Merkel herself implicitly acknowledged that not all the forces jeopardizing European unity are coming from Washington. As she observed, the United Kingdom just voted to withdraw from the European Union last year. And of course she knows how strong anti-EU sentiments remain throughout Europe, and how many stem from resentments over the outsized role Germany has played in dealing with (and allegedly contributing to) recent economic crises like the one that’s engulfed Greece.

Yet what Merkel may not yet know about her compatriots and other Europeans should trouble her even more. For example, according to Pew, German support for NATO is strong (67 percent view the alliance favorably). But only 40 percent of Germans agree that their country should use military force to defend a fellow NATO ally under attack. Fully 53 percent would want Germany to sit out the conflict.

Merkel might draw some comfort from seeing that Germany’s commitment to NATO’s core mission is the weakest among the countries surveyed. But it’s not whoppingly lower than the support for going to war registered in the two other major European military powers, the United Kingdom (45 percent) and France (53 percent). Further, the Pew results show that a distinct minority of those surveyed in NATO’s European members view Russia as a “major threat to their nation.”

Merkel, however, isn’t the only national leader who should be paying close attention to these Pew findings. If they’re accurate, President Trump and the rest of Washington need to ask themselves whether America can count on any prompt, significant assistance from NATO Europe if push comes to shove.

(What’s Left of) Our Economy: Why ‘Less Can be More’ in Trade with Germany – & Others

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Angela Merkel, currency manipulation, euro, Eurozone, Germany, mercantilism, non-tariff barriers, public investment, Trade, trade barriers, Trump, wages, {What's Left of) Our Economy

This week’s first meeting – in Washington, D.C. – between German Chancellor Angela Merkel and President Trump is being billed as a confrontation between polar opposites due to apparently clashing positions on immigration, trade, alliances and international organizations, and contrasting personalities. Actually, notwithstanding the penchant of the mainstream media and bipartisan policy establishment for Trump hysteria-mongering, one of the divides between Mr. Trump and Ms. Merkel may actually be more fundamental than recognized. Growing trade tensions might be signaling that the two economies simply aren’t structured to trade with each other in mutually beneficial ways – at least not at current levels.

So far, the mounting trade row – which could already be the most serious since American ire at an allegedly undervalued deutschemark during the Nixon era – has produced a now-predictable policy debate. The Trump administration is accusing Germany’s powerful economy of unfairly benefiting from a euro that’s kept weak because of the economic problems of its partners in the eurozone. As a result, goes the American complaint, its goods enjoy major price advantages over their U.S. competition all over the world for reasons that have little to do with market forces.

Germany and its sympathizers counter that the country simply makes terrific products, especially advanced manufactures, and that its trade barriers are actually on the low side. Another argument raised in Germany’s defense – in part because of a strong inflation-phobia created by the disastrous experience of the 1920s and by the population’s natural frugality, Germans tend to be low spenders and high savers.

All of the pro-German positions have merit. And the Trump administration case is further complicated by Germany’s consistent calls for eurozone economic policies that would tend to strengthen the common currency.

Yet Germany’s free trade record is at the least open to dispute. Although its tariff levels are generally low, like most other U.S. trade partners, it uses a value-added tax that effectively raises the prices of foreign goods headed for its market and reduces the prices of its exports via the rebates they receive. Moreover, even before President Trump took office, the U.S. government repeatedly reported that non-tariff barriers maintained by Berlin “can be a difficult hurdle for companies wishing to enter the market and require close attention by U.S. exporters.” The country’s government procurement market appears to pose special problems. According to the American Commerce Department under former President Obama:

“Selling to German government entities is not an easy process. German government procurement is formally non-discriminatory and compliant with the GATT Agreement on Government Procurement and the European Community’s procurement directives. That said, it is a major challenge to compete head-to-head with major German or other EU suppliers who have established long-term ties with purchasing entities.”

Nonetheless, the more closely the German economy is examined, the less amenable to standard trade policy remedies it looks. For Germany has long decided to create a national economic and business model that seeks both to maximize net exports and depress consumption at home. Two examples should suffice to make the case.

First, although Germany’s is, as frequently noted, a high-cost, high-regulation country, upon adopting the euro, its government put into effect a series of policies that put its labor costs on a much slower growth path than those of the rest of the eurozone and the high income world as a whole (including the United States). As many critics of Germany have charged, the resulting wage repression has overpowered the euro-dollar exchange rate and in fact amounted to an “internal devaluation” that produced the same effects as currency manipulation.

Second, Germany has also limited its consumption levels in part through very low expenses on infrastructure and other public investments. Moreover, according to one former European Central Bank official, the country’s external orientation has been so pronounced that “private investment in Germany’s aging capital stock has been weakened by many German companies’ desire to invest abroad.”

Revealingly, some of the harshest attacks on these and similar German policies have come from the eurozone itself. In particular, members like Greece and other southerly countries have accused Berlin of conducting a mercantilist campaign to grow at their expense by flooding them with exports and denying them comparable opportunities to supply the German market.

Without taking sides in this dispute, it’s clear that because the eurozone is a currency union, its success arguably depends on members conducting both their domestic and foreign economic policies in mutually compatible ways. So in principle, Germany’s eurozone fellows have grounds for complaining about the totality of the German national model. (The reverse holds as well in principle.)

The United States also should be perfectly free to ask Germany to change its priorities. Unlike eurozone members, however, it has no legitimate claims to influence over this vital aspect of German sovereignty. Germans apparently have decided that their choices work for them, and are absolutely correct to insist that aside from the rules of the World Trade Organization or other international legal arrangements, they have no obligations to accede to foreign demands for reform. Berlin, moreover, has a point when it notes that the United States should look to domestic practices of its own that might be hampering its global competitiveness, rather than placing the burden of change on others.

This German argument, however, is not dispositive. After all, if America’s national business and economic model emphasizes consumption and domestic-led growth rather than promoting net exports, that’s a choice that its own political system has been entitled to make. Moreover, it’s a choice that makes considerable sense for a big, continent-sized economy with great potential for more national self-sufficiency in a wide variety of goods and services. Germany has no more right to dictate U.S. preferences than vice versa.

The decisive difference between the two countries is that Germany has been happy with the pre-Trump status quo, and the United States has not. Washington of course has the right to press complaints about possible German violations of world trade law and other trade agreements. But it also needs to recognize that such conventional approaches are dwarfed by the breadth and depth of Germany’s approach to economics. Promoting German reform isn’t likely to work, either – given the above sovereignty concerns, and given the sheer difficulty facing even so powerful a country as the United States in urging domestic reform on another powerful country – especially one that views itself as a success.

So what to do?

First, in general terms, understand that, however legitimate Germany’s sovereign decisions, they create problems to which the United States is equally entitled to respond

Second, without continuing to hector or nag Germany, figure out the most effective response and act accordingly.

Third, depending on Germany’s counter-moves, decide what combination of unilateral carrots, sticks, and negotiations, might achieve progress (including some acceptable compromise), while preserving approximately current levels of trade.

But fourth, recognize along the way that Germany’s legitimate sovereign economic decisions simply may not permit bilateral trade to continue at those levels with acceptable results for the United States. If need be, then, revert to whatever unilateral strategy can preserve or enhance interests America has identified as its own priorities.

The new status quo would put the ball in Germany’s court, and grant it full scope to accommodate the United States if it’s dissatisfied, or make whatever other changes are needed to achieve whatever new objectives it chooses.

In other words, Washington should deal with Germany through an ongoing process of give and take, employing a variety of tactics and tools in flexible, agile ways. The aim would be to capitalize on its considerable leverage but also understand where it can and can’t hope to succeed at acceptable cost and risk. This approach clearly has a less impressive upside than efforts to produce grand bargains, or than more extensive international economic integration schemes — both of which can in theory maximize bilateral commerce. But its very modesty means that it’s less likely to risk angry misunderstandings and consequent major blow-ups, and more likely to result in trade and investment that’s sustainable not only economically, but politically, socially, and culturally.

President Trump can think of this new policy framework as the Less is More Strategy. And he should realize that its usefulness extends far beyond Germany.

Im-Politic: No Learning Curve for America’s Left on Immigration

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American Muslims, Angela Merkel, assimilation, Attorney General, Cory Booker, Democrats, Elizabeth Warren, Germany, Hillary Clinton, Im-Politic, Immigration, Jeff Sessions, Jeremy Corbyn, Labour Party, liberals, Marketwatch.com, Muslims, national security, Obama, Open Borders, progressive, Social Democratic Party, terrorism, Trump, United Kingdom

I keep waiting for America’s self-styled progressives to start recognizing that they’re going absolutely nowhere in national politics until they abandon their devotion to Open Borders policies, and start responding to their fellow citizens’ legitimate economic and especially security concerns about mass immigration.

Sadly, nothing could be clearer from recent developments than that the wait will continue indefinitely. Even worse, the U.S. Left seems to be even more clueless on the subject than its counterparts in Europe.

Certainly President Obama remains unrepentant about his own record. In his Farewell Address, he touted his record in fighting Islamic terrorism overseas (not that he used the term), and warned against the dangers of domestic radicalization. But his boast that “no foreign terrorist organization has successfully planned and executed an attack on our homeland these past eight years” once again made painfully clear his neglect of the dangerous impact of already having admitting so many newcomers whose original religion or culture creates huge obstacles to successful assimilation into American society. Why else would he have glossed over the deadly attacks by Muslim immigrants in Boston, San Bernardino, and Orlando?

In fact, according to Mr. Obama, the only Americans who need to learn about current and emerging immigration realities are those in the native-born population – because their fear that some immigrants today could “destroy the fundamental character” of the country is not only obsolete, but bigoted.

Other progressives also seem to be doubling down on efforts to address valid immigration concerns with smears. Can anyone reasonably doubt, for example, that Alabama Republican Senator Jeff Sessions’ appointment as President-elect Trump’s Attorney General would be sailing through the Senate if had not so forthrightly championed immigration realism – and enforcing the nation’s existing laws?

Yes, many Senate Democrats have accused Sessions of harboring racist views and neglecting the rights of a wide variety of discrimination victims. At the same time, none of these alleged transgressions prevented New Jersey Democratic Senator Cory Booker – Sessions’ leading Congressional opponent – from feeling “blessed and honored” just last year “to have partnered with Sen. Sessions in being the Senate sponsors” of a Congressional Gold Medal for the voting rights activists of the 1960s. No one else in the Senate protested, either.

Maybe Booker’s Massachusetts Senate colleague, Elizabeth Warren, is moving in the opposite direction? Not if her declaration that she’s running for reelection is any indication. Warren marked the occasion by vowing to “fight back against attacks on Latinos, African-Americans, Muslims, immigrants, women, and LGBT Americans. Our diversity is what makes our country strong – and on this, there will be NO compromise.” As if all these groups can be lumped in the exact same victimization category.

In fact, the only sign of progress I can detect is that no progressives are urging Mr. Obama or Mr. Trump to quintuple the number of U.S. refugee admissions from war-wracked Middle Eastern countries – as failed Democratic presidential contender Hillary Clinton proposed.

The contrast with European progressive leaders is stunning. As reported in an insightful column on Marketwatch.com, the head of Germany’s Social Democratic Party – and the country’s vice chancellor in the current coalition government – is calling for “ncreased video surveillance…a ban on fundamentalist mosques as breeding grounds for terrorism, and…an end to freeloading on Germany’s generous child-support subsidies by other European Union citizens.”

Another German progressive leader has slammed Chancellor Angela Merkel for “uncontrolled border opening [and]a police force that has been downsized to the point of inefficiency, that neither has the personnel nor the technical resources that would enable it to cope with the current threat situation,”

Meanwhile, Jeremy Corbyn, who heads the United Kingdom’s struggling Labour Party, is unmistakably rethinking his former opposition to Britain’s decision to leave the European Union in large part because of the grouping’s lax immigration policies. Corbyn had previously opposed “Brexit,” which British voters passed in a referendum in June.

Germany, of course, has experienced Muslim terrorist attacks much bloodier than America’s. The Labour Party seems headed for its worst showing in Parliament since the 1930s. Will it take these kinds of security and political disasters to bring U.S. progressives to their senses on immigration?

Following Up: For Greece and Creditors, Minimalism = Realism

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Angela Merkel, austerity, bailouts, debt, EU Stability and Growth Pact, euro, European Central Bank, European Union, Eurozone, Following Up, France, Francois Hollande, Germany, Greece, International Monetary Fund, Russia, Syriza

Every new fact emerging from Greece and its plight seems weirder and weirder. Today, the day of the country’s referendum on its creditors’ proposals to handle its financial crisis, the Greek government started issuing “official projections” of the final results. Not that Greece covers multiple time-zones like the United States, but I’m sure glad Washington isn’t in that possibly elections-altering business.

As of this writing, the only (apparent) certainty about the Greece mess is that its population has rejected the latest bailout-for-austerity deal offered by the European Union, the European Central Bank, and the International Monetary Fund. Even Europe’s most important national leader, Germany’s Angela Merkel, doesn’t seem to know what comes next; before the polls closed, she announced that she’ll meet tomorrow with French President Francois Hollande for a “joint assessment of the situation.”

Europe’s immediate challenge is deciding what a “No” vote by Greece means for the future of the European Union and of the eurozone – since Greece appears to have decided to break the rules of these rules-based institutions. (Here it’s important to note that Greece has by no means been the first rule-breaker, and that two of the biggest outlaws – when it comes to the EU’s Stability and Growth Pact – have been Germany and France.) How the continent handles the Greek challenge will surely influence how other economically hurting, debt-strapped – and larger – members of its defining organizations will react.  Specifically, will Portugal and Spain and ultimately even Italy more actively wonder whether they are better off remaining within such arrangements or leaving?

In turn, these decisions have huge national security and geopolitical implications. However flawed they have or haven’t been, pan-European institutions have been major pillars of the free world’s strategy for turning the continent into a zone of peace following centuries of calamitous wars.  In a nuclear age, for the entire world’s sake, these conflicts simply could not be allowed to continue. It’s eminently arguable that these institutions were insufficiently democratic or badly structured from an economic standpoint, or simply that they sought too much too soon (or too little too late, depending on your viewpoint). But if they fall apart, recreating them will be excruciatingly difficult, and Europe will surely become a more, not less, combustible place.

Worse, this new instability would emerge just at a time of rising tensions between America and its European allies on the one hand, and Vladimir Putin’s Russia on the other. Indeed, it’s entirely possible that Greece’s Syriza party leaders are betting on precisely these dangers to produce greater flexibility by their creditors.

But as important as these threats are, it’s tough to imagine any of them being solved or even headed off for very long if Greece’s fundamental economic problems aren’t solved, and what’s painfully clear to me is that no one in charge anywhere has a realistic plan.

As I suggested last week, Greece lacks a viable national economy. And no bail-out programs or austerity policies, much less further can-kicking, do anything to change its fundamental predicament. It doesn’t produce enough goods and services at affordable prices to meet its own current (first world-level) desires. It doesn’t produce enough of anything that the rest of the world is willing to purchase from it that’s needed to fill the gap. And I haven’t seen any evidence that any Greek leaders or European leaders are even thinking in detail about these issues – which matter crucially these days because the world economy is growing so sluggishly.

The closest I’ve seen to any micro-economic and structural thinking about Greece’s future is the idea that the country could ride a tourism boom back to respectable growth if either (a) the Germans and other wealthier Europeans would simply spend more of their incomes on Greek vacations; or (b) a currency devaluation following an exit from the euro made Greek vacations an irresistible bargain for the entire world.

Leaving aside the lunacy of believing that tourism and the overwhelmingly lousy jobs it creates can sustain Europe-style living standards, how many Europeans and others are likely to flock to Greece for the foreseeable future? By all accounts, many of its neighbors’ populations are thoroughly fed up with Greece’s perceived insolence, and its likely near-term future of economic turbulence doesn’t look like a formula for filling hotel rooms.

So I see no reason to change my view that most of Greece is headed for at least years of third world living standards no matter how the next few weeks and months turn out. It’s true that no one “owes Greece a living,” especially given the spendthrift choices made by its leaders and accepted with varying degrees of enthusiasm by so many of its people. Similarly, it’s true that no one forced the Greeks to borrow all the money that private sector European lenders foolishly provided. But it’s also true that both European financiers and the pensioners and other clients whose funds they invested in Greece, have gotten off pretty easy for their reckless choices, with the continent’s taxpayers and the governments they underwrite absorbing many of these losses.

As a result, maybe at least some of the intertwined political and emotional obstacles to genuinely constructive Greece policies could be cleared away with two measures. First, European authorities in particular should offer Greece some honesty. Second, that country’s financial enablers should be required to help fund purely humanitarian programs aimed at helping those Greeks who are suffering through no fault of their own.