Rising tariff war between the United States and European Union underlines drive to dominance over investment

Contributed by Joe Montero

Responding to pressure to open up to massive United States economic penetration, the European Union is moving to retaliate by imposing tariff on American imports.

The immediate trigger is what the Europeans consider illegal state aid given to Boeing by Washington, which has been a matter of dispute in the World Trade Organisation for 14 years. Washington argues that the European Union is providing state protection for the Airbus.

This dispute over airliner support is not the real core of the difference.

Tempers have been simmering for years. The lumbering United States economy is dependent on the export of investment funds, and Europe is the most lucrative region on the planet. The difficulty is that the European Union is protective of its independence as a political and economic community.

European Union nations have more stringent controls over investment, firmer environmental protections, and some blocks to goods imported from outside the Union, especially when it concerns agricultural products. Farmers have been heavily protected for a very long time, because they form a powerful political block.

The United States has been pushing hard for these barriers to be removed.

In addition, the European Union is a formidable rival in terms of investment, trade and control over the global economy, at a time when a new expansion of United States influence has become the cornerstone of Washington’s foreign policy. This is a strong incentive to keep the European Union in check.

Tensions have come to a point, where the European Commission is drafting a list of retaliatory tariffs on $US22.6 billion worth of American imports. The news was let out last Friday, as the French Finance minister Bruno Le Maire met his counterpart Steven Mnuchin in Washington.

Donald Trump has vowed to retaliate with its own tariffs on European imports worth $US12 billion.

The bottom line is that while both trading blocks talk a lot about free trade, the reality is that free trade is really something to impose on others, while the domestic economy remains highly protected.

Trade in goods might be the immediate battle ground. There is the matter of the airliners. There is also the United States insisting opening up to agricultural products and the European Union insisting on opening up to European cars and a range of steel products.

Both rely principally on the export of investment funds, and it is how these flow into each other’s spheres of influence that is at the heart of the rising tension. The was underlined in the Transatlantic Trade and Investment Partnership (TTIP) and related leaked documents

The ultimate battle is over control of the financial system and the share portfolios and control over the corporations. It is the elephant in the room that is not being talked about.

Rivalry between the contenders has other dimensions. The United States and Europe have both reached a time of long-term stagnation and they share the creep of greater political instability. Each is increasingly keen to resolve its difficulties through expansion into the global economy. The risk is that this will further increase economic and political instability.

This is a recipe for the rise of political friction. Punch and counter punch have the potential to have a major impact on the global economy and politics. This must affect all nations.

It is a hangover of a system dominated by superpower blocks. This regime must be left behind and replaced by a global system of many centres of influence and dominated by none.

The global economy must shift from dependency on the export of investment that concentrates most profit into one or two centres, to one that is increasingly dependent on eliminating the dominance of big powers, mutual benefit, sustainable development, greater equality and mutual respect.

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