Foray into Down Under

"State of the Union" Speech

In this year's "State of the Union" speech in mid-September, EU Commission President Jean-Claude Juncker not only proposed the rapid expansion of the euro zone to include all EU members, but also to extend the EU free trade regime by concluding agreements with Australia and New Zealand. This would be particularly beneficiary for the export oriented German economy. Through its austerity policy, Berlin is seeking to impose the German model of trying to achieve the highest possible export surplus on the entire euro zone - literally exporting the European debt crisis. He is proposing to EU members that free trade negotiations with Australia and New Zealand be initiated, Juncker declared, because they would guarantee jobs in the EU. Every additional €1 billion in exports supports 14,000 extra jobs in Europe, the EU Commission President noted.[1] He considers his recent proposals to be part of the German elite functionaries' more far-reaching global efforts to create a wide-reaching network of free trade agreements with all important economic zones, following Donald Trump's election to the US presidency.[2] Juncker pointed to current negotiations with Mexico and South American countries [3] and the already concluded EU-Canada Comprehensive Economic and Trade Agreement (CETA). Brussels and Japan have also agreed on a similar treaty - the Japan-EU Free Trade Agreement (JEFTA). These negotiations should be finalized by the end of 2019, according to Juncker.

Strategic Interests

Reacting to the broad criticism of previous secret negotiations on free trade agreements, which had barely allowed public discussion of undemocratic regulations, Juncker promised transparency in future negotiations. In some cases, free trade agreements have undercut the basic political and socio-economic leeway of elected institutions and bodies - for example by promising companies a minimum return following privatization. "Gone are the days of no transparency," Juncker claimed. There are no "naïve free traders" in Brussels. Europe must always defend its strategic interests. The EU Commission President hinted at protectionist measures that should accompany Brussels' free trade offensive. The EU Commission would propose a "screening" of all investments of non-European companies in the EU to protect its strategic sectors such as harbors, infrastructure and defense, Juncker announced. These measures are particularly directed at China.[4] German politicians and business associations are reacting with increasing resentment to the People's Republic's growing cooperation with countries at the EU's eastern and southeastern periphery, which Berlin sees as its economic backyard, as a "prolonged work bench." (german-foreign-policy.com reported.[5])

In the Interest of Business

German business associations have reacted positively to Juncker's proposals and welcome both the expansion of the euro zone and the EU's tree trade agreements. It is "right and important" that the debate on EU reforms is now making progress, declared the CEO of the Federation of German Industries (BDI) Joachim Lang. Europe needs to "pick up speed with its reforms." The more countries joining the euro zone, the stronger it will become, as long as "the strict criteria for admission continues to be taken for granted." German industry also explicitly supports "the proposals for new free trade agreements with Australia and New Zealand," Lang emphasized.[6] On the other hand, European media reports that German politicians avoid mentioning the "controversial subject of free trade agreement." This will continue, "at least until the parliamentary elections are over."[7] Until now, free trade agreements, for example the aborted TTIP Treaty, have encountered overwhelming rejection by the population.[8] In the meantime, nearly all major parties in Germany are watering down their tree trade commitments with protectionist demands. Legitimate measures against "unfair trade practices" should be added to Germany's expansive trade policy, is one of the demands. The Christian Democratic parties' election platform literally states, "We will protect ourselves against unfair trade practices." However, the CDU and the CSU are sticking to CETA and want to resuscitate TTIP.

In the Footsteps of the USA

With the initiation of free trade talks with Australia and New Zealand, the German export industry is reinforcing its foray into a region that, until now, had been closely tied to the USA. The protectionist course being taken by the new Trump administration has left a vacuum in Australia that competing powers - including the German dominated EU - are trying to fill. When President Trump canceled the Trans-Pacific Partnership (TPP) free trade zone, initially sought by his predecessor Obama, the government in Canberra began orienting itself on China.[9] The People's Republic of China could simply join the TPP, following the USA's withdrawal, argued Australian Prime Minister Malcolm Turnbull, in early 2017. Originally, TPP was supposed to serve an American containment strategy against the emerging People's Republic of China. In the meantime, however, attempts to resuscitate the agreement have bogged down.[10] At the end of August, Australian politicians were saying that without the USA, it was a "pure waste of time." Australia should devote its energy toward establishing "other free trade agreements." Brussels and Berlin are now hoping to score points, and in the footsteps of the USA, gain significant political as well as economic ground in China's strategic neighborhood - while the German government and the EU Commission are initiating defensive measures thwarting China's economic activities in their own geographic environment.[11]

Free Trade with Japan

Berlin is not only seeking to step into the USA's footsteps - at least economically - with Australia and New Zealand. The Japan-EU Free Trade Agreement (JEFTA), which Brussels and Tokyo agreed in principle at the beginning of July, after long negotiations, is aimed at the USA's closest East Asian ally. It is reported that this would be the "world's largest free trade zone."[12] Japan should benefit from the gradual discontinuation of EU customs on Japanese autos, while the EU hopes to be able to increase its food exports by 180 percent. Should both agreements enter into force, Berlin would have concluded free trade agreements with two important economic zones at China's eastern and southeastern flank. However, it is still unclear, whether the EU can gain a foothold on the sealed Japanese market. So far, all efforts, particularly those undertaken by German industry, have failed.[13] Germany, the world export champion's attempt to hamper China's unfolding power through free trade agreements with export oriented economies, such as Japan's, and to become the heir to the USA, have little chance, even in a purely mathematical sense: If both sides stubbornly insist on their export surpluses, it is unclear which side should shoulder the trade deficits, that this policy will necessarily engender.

[1] Juncker will Freihandelsabkommen mit Australien und Neuseeland. wienerzeitung.at 13.09.2017.
[2] Merkel will Bekenntnis zum Freihandel in Gipfel-Erklärung. spiegel.de 06.06.2017.
[3] See Driven into their Arms and Anti-Trump (II).
[4] See In der Defensive.
[5] See Berlin Calls for a "One-Europe Policy".
[6] BDI-Hauptgeschäftsführer Joachim Lang zur Rede von EU-Kommissionspräsident Juncker: "Europa braucht Tempo bei Reformen". presseportal.de 13.09.2017.
[7] Nicole Sagener: Freihandelsabkommen - Reizwort vor der Bundestagswahl. euractiv.de 13.09.2017.
[8] Große Mehrheit der Deutschen sieht TTIP kritisch. spiegel.de 04.05.2016.
[9] TPP ohne Amerika - aber mit China? faz.net 24.01.2017.
[10] Esther Blank: Australien will auch ohne Trump. nzz.ch 30.08.2017.
[11] See Berlin Calls for a "One-Europe Policy".
[12] Jefta soll 2019 in Kraft treten. zeit.de 06.07.2017.
[13] See Partners at the Pacific.