A New Look EC on the Horizon
Trading Old EU Leaders for New
Ursula von der Leyen has announced her nominations for the European Commission, and various critics have taken issue with the “bizarre” choice of job titles. Whatever union exists in continental Europe these days seems to be fraying somewhat, and it appears that U.S. politicians have taken note: Ex-GOP Congressman Lou Barletta (R-Pa.) is leading a new coalition to prevent Italian-made goods from being targeted by U.S. trade policies. He will lead the American Italian Food Coalition (AIFC), a consortium of companies seeking to protect Italian pasta, coffee, biscuits and wafers from U.S. tariff policies. The AIFC argues that Italian-made goods should not be part of the USTR retaliatory tariffs because when Airbus received subsidies from European Union states, Italy was not one of them. “Italy shouldn’t be punished for the actions of other countries”, says Barletta. Hmm. Is it time to re-define the term “union”?
Social Media’s Chaotic Effect on Democracy
U.S. Ambassador Gordon Sondland recently accompanied U.S. Secretary of State Mike Pompeo to a meeting with incoming EU Leadership and voiced his general optimism about the future of trade with the EU. While acknowledging to reporters that there have been many “uncomfortable cranky conversations” in recent months, Sondland expressed his hopes that fresh faces will signal an end to the current impasse. Meanwhile, European Council President-elect Charles Michel cautioned against the EU becoming a casualty of the U.S - China Trade war, seeking instead a new level of cohesion and cooperation between member states. He also addressed the Brexit quagmire, calling for speedy resolution. Change is good!
Big Tech and Chinese Tariffs
President Trump has forever changed the model of democratic leadership through his use of Twitter. He engages directly with the public, bypassing experts and the media. It’s a coordinated, “outsider” communications strategy which cleverly seeks to dumb down complex issues like the ongoing trade wars, the migrant crisis and global warming. Opportunistic use of social media can be a double-edged sword however, as Italy’s Matteo Salvini is learning the hard way. As Deputy Prime Minister and leader of the anti-migrant League party, Mr. Salvini recently made agitating calls for snap elections which in part forced the resignation of Prime Minister Giuseppe Conte. Some analysts suggest that the current chaos in Italy’s government may galvanize Salvini’s supporters, and he will ultimately benefit. Others say he misjudged his enemies’ willingness to join forces against him, and he’ll sit on the sidelines until official elections three years from now. He still has over one million Twitter followers. Time for a tweet or two?
Many people fail to understand how incestuous the global supply chain is when it comes to smart phones and other high-tech gadgets. Apple has a production facility and various suppliers in China. AT&T, Belkin, and Intel are just some of the many American companies who either own factories or have contract factories producing their products in China. Some companies go all in, and others only produce parts. Either way, the question becomes; by threatening to levy more tariffs on China, is President Trump in fact making it more difficult for U.S. companies to remain competitive? And where does that leave the many EU - based tech giants like Logitech who also have deep ties to China?
Nord Stream 2 Pipeline Divides the EU
The EU’s main economic engine is Germany, and President Trump’s recent tariffs targeting the German automotive industry may be pushing the whole region towards recession. Geopolitical issues related to trade are putting pressure on EU countries to choose between China and the U.S. when it comes to their long-term strategic interests. This is a choice that many in the EU are reluctant to make, but if the US- China trade war continues indefinitely their hands may be forced. In the meantime, the markets weigh in…
Trump’s Beef with the EU
As political tensions between the US and Russia continue to mount, many in the US and EU are skeptical of claims that the pipeline’s sole purpose is to deliver sustainable energy. Germany is in favor of the project, Poland not so much, and the Ukraine stands to lose its favored middle-man status. The threat of a US sanctions bill assigning restrictions on companies involved with the project is exposing new cracks in an already fractured alliance. Security issues in the Baltic Sea are at the heart of the naysayer’s concerns, and US Ambassador Sondland has openly criticized the EC for not doing more to kill the project.
Geostrategic Challenges and US-EU Trade
The EU and U.S. have come to an agreement on allowing more hormone-free American beef into the EU. The agreement will give U.S. exporters a larger share of the overall amount of beef allowed into the EU every year, which is currently 45,000 tons in total. The deal will not change the overall import volume and it still needs approval by the European parliament. President Trump has also announced plans to tax French wine in retaliation for the GAFA tax. French Agriculture Minister Didier Guillaume called such threats “moronic” and “absurd”.
The EC’s First Woman President
US Ambassador Sondland recently addressed attendees at the Centre for European Reform luncheon. His rhetoric was direct, pointed, and constructive. Gone are the days of talking around issues- he wants to have the difficult conversations, and have all parties admit that Cold War-era hopes of China and Russia moving towards democracy have not been fulfilled. His remarks stand in strong contrast to the media’s doom and gloom view of impending retaliatory tariffs and the chances of Boris Johnson and Ursula von der Layen being part of the solution. Don’t worry, Sondland has a plan.
France Passes a Digital Services Tax Bill
Ursula von der Leyen was elected as the next president of the European Commission on Tuesday, July 16th. She becomes the first woman to ever hold the position and the first German since Walter Hallstein, whose tenure lasted from 1958 to 1967. Politico has published a satirical piece featuring the kind of emails she can expect to receive from world leaders as she tries to build consensus with less of a mandate than her predecessor, Jean-Claude Juncker. Good luck with that!
Internet-based businesses with global revenue of more than €25 million ($28 million) in France will now be assessed a 3% tax on revenue. This new measure complicates trade negotiations between the US and the EU. President Trump maintains that the law unfairly targets Silicon Valley tech giants and has called for a Section 301 investigation, while warning of retaliatory tariffs on French products.