Text edited on the basis of the 161st episode of the podcast Voice of the National legislature on the US and Europe – Partnership at stake?
The United States and the European Union are the largest trading partners in the world. We are so fascinated by the improvement of China and the momentum of the American and Western European industries to invest in China that we do not realize that US investments in Europe and Europe in the United States are inactive repeatedly larger than any of these partners in China. We're talking about 7 or even 10 times the difference. yearly American-European trade is incomparably larger than American-Chinese trade.
At the same time, my American friends, who, after a long stay in Europe, return to their homeland, feel like they are in a 3rd planet country. The United States has not invested adequate in its own infrastructure in decades (airports, schools, highways, bridges, etc.). In a collision with this reality, Europe appears to be an highly prosperous and modern continent. The deficiency of improvement was already annoyed not only by the elite, but besides by American society – whether they are voters of Democrats or Republicans. The effort to respond to this situation was "Bidenomika" (Bidenomis), i.e. the economical policy of president Biden (and his administration), who succeeded (which is an amazing achievement, given the practice of the past decades)1 encourage Republicans to support reindustrialisation and investment in American infrastructure.
However, erstwhile America looks at itself and its needs, economical relations with the European Union suffer. Biden's economy was based not only on national investments and public-private partnerships, but besides on immense subsidies. 3 laws were passed during Biden's presidency. The most crucial of these is the alleged IRA (Inflation simplification Act – cost: $891 billion). This law, formally aimed at combating inflation, was in fact a immense financial injection for industry, which is willing to produce in a climate-friendly way in the United States. The Act on Infrastructure Investments and Jobs was besides passed (Infrastructure Investment and Jobs Act – cost: $1.2 trillion) and the bill CHIPS and discipline ActWith $280 billion of fresh national funds allocated to stimulate the investigation and production of semiconductors in the US to become independent of external supplies. To this all should be added the duties imposed by president Trump on certain European products, including steel, aluminium, but above all, especially for Germany, France and Italy, on the import of cars to the United States, which is heavy affecting the European industry. president Biden only softened any of them.
The concept of Bidenomika (Bidenomis) has ceased to specify the economical policy of president Biden (and his administration) based on reindustrialisation and investment in American infrastructure. These investments are objectively needed, but erstwhile America focuses on itself and its deficits, economical relations with the European Union suffer.
This puts European exports in a worse position than US partners. We are dealing with a threat that is already partially realising. Europe does not stay in America's debt, considering the introduction of akin volumes of tariffs on American products. These remarkable moves of Biden's administration (investment of immense money in the green future of American production) are reflected in Europe. A survey among the heads of the chemical manufacture in Germany revealed that around 40% of them, under the influence of the introduced export restrictions and subsidies, are reasoning of transferring at least part of their production to the United States. Given the importance of the chemical manufacture in Germany and across Europe, this would be a immense blow to the European economy. This is just a foretaste of the problems that the EU will gotta face in the face of further changes in US policy, linked to Donald Trump's second presidency period.
In the following years, I anticipate greater care for the narrowly understood American interest. Already the rhetoric of Biden's administration, focusing on reindustrialisation and green development, has truly hidden the determination of the full establishment to improve the position of the American economy. I realize that very well, due to the fact that the United States technology and manufacture base was headed under the influence of "Reaganomika" to retreat the state from the investment. And let us remind you that the top technological achievements of the United States in the past have been due to national investments, frequently of a military nature, which active private companies to make technology. Therefore, following the demands of ‘Reagonomics’ and the alleged Chicago Consensus, the state's participation in the improvement of the home economy was drastically reduced. The competitions then began to be guided by a much narrower rationality than the "state" rationality and invested where it was greater, frequently short-term, profits; where they could number on lower labour costs, mediocre securing of labour rights, greater subsidies or taxation breaks. Their goal was mainly China, with the most crucial investment aphrodisiac being not so much the inexpensive labour force or the favour of the communist authorities, but a immense Chinese marketplace – with a increasing mediate class – of 800 million consumers at the time. abruptly it turned out that the United States had begun to lose its competitive advantage in industry. The increasing imbalance in the trade balance with China (but besides with the European Union), linked to the expanding national debt, burdened the US budget enormously, making Republicans and Democrats think about how to introduce fresh growth impulses that would service the American economy.
Realizing the essential function of the United States in Europe's security, we should care about a strong and innovative American economy. Nevertheless, the solutions implemented will not service economical improvement in the world, both among the closest US allies in Europe and Asia. The problem is that their actions are unilateral and, in addition to what is commonly accused of being Americans, violate the rules governing the world's trade organisation, agreed at the planet Trade Organisation.
The increasing imbalance in the trade balance with China (but besides with the European Union), linked to the expanding national debt, burdened the US budget enormously, making Republicans and Democrats think about how to introduce fresh growth impulses that would service the American economy. Unfortunately, their unilateral steps violate the rules governing the world’s trade organization.
In this context, ensuring that Jake Sullivan, a national safety advisor for the US, uses the Act on simplification of Inflation to build an eco-friendly ecosystem of manufacture rooted in supply chains in North America, but covering Europe, Japan and another allied countries, is simply a kind of political ornamentation. The reality is revealed by the next EU-US Trade and Technology Council, which is held on a regular basis all fewer months (also at summits with leaders of states and governments). Unfortunately, they are making small progress, due to the fact that immense subsidies and national investments in the US have fundamentally changed the rules of the game. Customs duties on a number of key products put the EU in a worse competitive position. Interestingly, the announcements of the introduction of European subsidies met with the complete indifference of Americans.
The improvement of national subsidies brings the anticipation of returning the planet economy to the tracks of economical protectionism. It's a very dangerous vision. After all, it was thanks to the open marketplace and global trade after planet War II that economical improvement of the full planet and the exploitation of over a billion people from poorness took place. so the possible of changing the rules of the game and de facto the closure of the largest economies will have repercussions of a global dimension. But politicians, like politicians, frequently think about their own prospects, about the upcoming elections and about gaining public support. And most Americans are in favour of reducing the function of the United States in the world.
Can it be said, then, that we are entering a period of departure from globalisation and enhanced state interventionism, like the 1 we last observed in the 1940s and 1950s.2? In Europe, any functions have been taken over by the European Union – in the form of direct investment (which, however, do not play a very crucial function due to the fact that the Union does not have specified large resources), but, above all, by granting public aid, which is granted to associate States in justified cases by the European Commission. The fast increase in this aid to save the European economy (also in Poland) occurred after the COVID-19 pandemic. A large part of it has been allocated for political and economical reasons – to defend businesses and citizens from rising energy prices as a consequence of the crisis that followed the massive withdrawal of EU countries from cooperation with Russia following the aggression against Ukraine. At the same time, the European Union has adopted a peculiar temporary fund to support the economy (Next Generation EU) EUR 750 billion available in the form of grants and loans to reconstruct the economy and increase its resilience in the future. For the first time in history, associate States have agreed to enter into Community debt in global currency markets. These 2 examples of mechanisms show how public government participation in the economy looks in practice in new, very hard conditions.
The improvement of national subsidies poses a danger of the planet economy returning to economical protectionism. Thus, the possible of changing the rules of the game and de facto closing the largest economies will have repercussions of a global dimension. But politicians, like politicians, frequently think about their own prospects, about the upcoming elections and about gaining public support. And most Americans are in favour of reducing the function of the United States in the world.
There has so been an increase in awareness that public authorities should have a greater impact on economical development. Unfortunately, European subsidies, implemented as a consequence to economical crises, lead to the destabilisation of the interior marketplace in the Union. This is due to the fact that countries smaller than Germany, France, the Netherlands or Italy do not have the financial capacity to channel public budget money to aid the economy. On the another hand, there are countries, specified as Sweden, which are little likely to go for state aid, i.e. de facto State interventionism. Due to the economical crisis and the slower improvement of the European Union than the United States, we are faced with an expanding function of subsidies either EU or government in individual associate States. These subsidies destabilise the common market, which affects the competitiveness of European manufacture as a whole, as well as the scope of investment in general (especially in green technologies and artificial intelligence). All of this makes us deal with fresh phenomena in which – through crises and the request to make fast decisions on the basis of “reward who can” – a certain stableness and predictability between business and politics has been compromised.
Donald Trump's renewed triumph in the presidential election widens the sphere of uncertainty in many areas, including support for heroicly fighting Ukrainians and strengthening the transatlantic alliance. There is no uncertainty about industrial and trade relations with Europe, as Trump announced in the pre-election run an increase of up to 20% for European goods. Apparently, the president and his advisors underestimate the scope of interdependencies in investments, production and services. So how can we prepare for a fresh reality?
On its own, Poland has limited capacity to respond to external economical threats – especially since the Union has exclusive, treaty powers to specify trade relations with the outside world. Differences and division of work between 27 associate States make the EU suffering from interior dysfunction and does not exploit its geo-economic power. This is about imposing and enforcing tariffs, sanctions, export control and another economical management tools.
Subsidies destabilise the common market, which affects industrial competitiveness as well as the scope of investment in general. All of this makes us deal with fresh phenomena in which – through crises and the request to make fast decisions on the basis of “reward who can” – a certain stableness and predictability between business and politics has been compromised.
It is so essential to strengthen cohesion in order to reduce the capacity not only of China or Russia but of the United States to play associate States against each other. Coherence is hard to accomplish due to the fact that individual governments are reasoning about the competitiveness of their own economies, jobs or the purchasing power of voters, which affects the anticipation of opposing nationalist populist and sovereignist forces, i.e. anti-EU forces. Unity will increase the EU's bargaining power in relations with Washington, making it hard to exert force on individual associate States. And specified force on Poland can be expected from the determined and abroad Trump, who, in return for his engagement in security, can anticipate the government in Warsaw to block or mitigate possible EU repressions.
In the case of Polish entrepreneurs, diversification of exports should be advised. For this reason, Germany is engrossed in economical marazmus (some even talking about the crisis), and this direction represents 28% of our trade. If specified a situation persists for at least a fewer years, and this is what German experts, among others, predict, it will immediately affect the orders of German companies and companies in Poland. We are already observing this, especially in the automotive industry. If I were to advise the politicians of the ruling camp, there is simply a request for vigorous action at EU level to guarantee that money flows to the recipients in a predictable, transparent and taking account of the needs of smaller countries, not just the largest ones. With the apparent importance of the largest countries, the fact is that the Polish economy, having a very serious industrial base and an “arm” educated in the field of investigation and development, frequently young workers, can be tempted to increase its “tort” of abroad investments over the Vistula River.
On its own, Poland has limited capacity to respond to external economical threats – especially since the Union has exclusive, treaty powers to specify trade relations with the outside world. It is so essential to strengthen cohesion in order to reduce the capacity not only of China or Russia but of the United States to play associate States against each other.
Because the disruptions in the supply chain and values with China under the influence of the COVID-19 pandemic and later the American economical repression have been highly painful, many companies have late been looking for little fresh territories on an offshoring basis, that is to say, bringing production to the far reaches of the planet where it is cheaper, and in greater mention to friendshoring, that is to say, the location of manufacture in countries that are friendly, predictable, with a healthy and sustainable legal system, which are the best allies. Poland belongs to specified countries.
1 The first projects (of which small 1 remembers) were submitted by president Nixon. But then the Democrats refused to give him a "present" (especially in the context of the Watergate affair) and overturned it. The same was actual of the next presidents – Republicans opposed Carter, Clinton, Obama. To encourage both parties to support proposals for national investment is simply a immense success for president Biden and his administration. More about EU-US economical relations I compose in: The United States – an irreplaceable state but besides a problem (for Europe). fresh industrial and commercial policy of the USA, Center for global Relations, 7.02.2024, https://csm.org.pl/analy-za-csm-states-unified-unplaced-state-but-i-problem-for-europy/ [online access].
2 In fact, even later, i.e. until the alleged Chicago Consensus was announced, this highly free-market economical school of Chicago, alleged Reaganomika, the participation of states, governments in investments and the economy was very large.
