Letter from Edinburgh

Posted on November 9, 2020 by Andrew Milligan

For 250 years, European writers have been fascinated by how Americans behave. From Fanny Trollope’s ‘Domestic Manners of the Americans’ through De Toqueville’s ‘Democracy in America’ and more recent Alastair Cooke’s ‘Letter from America’, Europeans have been amused, amazed, or aghast at the antics of their American cousins.

This year has been no exception, as we watched a deeply polarised society take part in one of the most divisive elections in its history, against the background of a pandemic which has killed 4 times more Americans than died in the Vietnam War. The expense of it all is also difficult for Europeans to fathom. Candidates running for federal office and political action committees are estimated to have spent between $11-14 billion dollars, equal to the GDP of a mid-sized African country.

How will the election result be interpreted by Europeans? Initially with a sigh of relief nearly audible across 5000 miles of ocean. Opinion polls regularly showed a distaste for President Trump’s aggressive style, especially amongst European elites. A poll here in Scotland showed Biden favoured over Trump by 4-1. The harsh reality will soon appear, however, that a country more divided than at any time since its civil war has not repudiated Trump-ism, thwarting the hopes of many inside and outside the USA.

Most European governments will welcome President-elect Biden and his return to a more collegial approach towards foreign policy and geopolitics. He is expected to put more effort into bolstering alliances and returning to a multilateral approach. Biden has argued that Trump “has belittled, undermined, and in some cases abandoned American allies and partners”.

Announcements that the US will re-join WHO and the Paris agreement on climate change, placing more emphasis on a global values agenda, would gain him much favour in European capitals. A Biden administration would be expected to feature a more predictable and less openly hostile trade policy toward China, calming investor nerves. Trade talks between the EU and USA will always be difficult but at least artificial spats will cease and experts will be allowed to negotiate.

Yet one ‘European’ government may feel less happy about a Biden victory. The UK, hemmed in on several fronts, faces a difficult period in its relationship with the USA. It has not achieved its cherished US free trade deal. Biden has deep concerns about the impact of Brexit on Ireland. “Viewed from Washington, Brexit is an adventure in national diminishment” as Alex Massie pithily summed up the situation.

The UK government will surely invite Biden to the Palace and encourage Washington to renew trade talks. Boris Johnson’s government can be under no allusions, however, that negotiations will be tough, focused on opening UK markets to American farmers and pharmaceutical companies in return for some concessions on services trade. The UK accounts for just 3% of US trade in goods (versus 13-15% each for Canada, China and Mexico), but it is one of America’s largest trading partners in services. The UK also faces a worrying deadline. US law permitting trade deals to be fast tracked through Congress expires in July.

Although ‘Five Eyes’ security remains vital to US interests, and British newspapers may wax lyrical about the ‘special relationship’—a phrase that should have been retired years ago—it would come as little surprise to Number 10 if President Biden visited Berlin before London. Nevertheless, Prime Minister Johnson still has a few cards to play, and will use every opportunity to gain favour in Washington. The UK chairs the G7 and the now much more important COP26 climate change conference in 2021. Both will be forums for Johnson to press his case with Biden.

The EU, on the other hand, will welcome a US President who believes in building institutional relationships. Progress might restart on the Iranian nuclear deal, which the European signatories—France, Germany and the UK—have been desperately trying to save.

In other areas, however, EU diplomats will be wary of the new Biden Administration, whose policies towards trade may only change in style rather than substance. Biden will continue to protect US interests strongly, for example in terms of the regulation of American big tech firms. Although the Department of Justice may continue to pursue anti-trust actions against Google parent Alphabet Inc. and many Democrats are keen to curb the power of Silicon Valley’s biggest firms, if a like-minded EU moves too quickly ahead of Washington frictions could intensify.

Elsewhere, the Biden Administration will likely continue to pressure NATO partners to meet the 2% of GDP defence budget target, partly to confront Russian expansionism. There are signs that Germany is ready to accept the quid pro quo of investing in its military in return for freer trade. At the same time, America’s pivot to Asia and longstanding history of isolationism suggest the Atlantic Alliance will continue to drift apart. As Bruno Le Maire, the French finance minister, admitted “Let’s not kid ourselves. The American continent has detached itself from the European continent.”

European exporting companies will take a keen interest in how the US economy recovers under a Biden Presidency. Worryingly for them, hopes for large-scale fiscal stimulus have been dashed as the ‘blue wave’ crashed, leaving divided government in Washington. The size of any fiscal package this winter is likely to be closer to the lower end of the $1-3 trillion figures bandied about in recent months. For a continent accustomed to the caboose role, it will be disheartening to see a weakened locomotive chugging slowly uphill. Growth projections from the recent Chinese Communist party policy meetings now look rather more promising.

Once the election dust settles, Europe will be confronted by harsh realities. Many of America’s objectives and interests are not well aligned with those of Europe. A divided Congress will weaken America’s economic policy response to the pandemic, enhancing China’s global economic heft. Russia remains a common threat, and the US will demand that Europe shoulder more of the security burden. A polarized America will hamper its ability to co-ordinate responses to key global issues including bio-, cyber- and climate security.

The pandemic has taught us that “no man is an island”. In truth, however, America has been drifting away from Europe for decades. A Biden presidency cannot reverse powerful currents, it can only smooth some of the waters. Europe must come to terms with the currents, not just the personalities, determining its future. In doing so, it must also find the courage to assume the responsibilities befitting the world’s largest economic region.