All posts by John C. Hulsman

Europe’s place in the multipolar world

Introduction: The Lesson of the G7 train wreck

 It’s official. After the calamitous G7 summit meeting in Canada, it is clear that an unbound Donald Trump is Europe’s worst nightmare. Although with typical unnecessary narcissism he came late and left early, what Donald Trump did in his few short hours on Canadian soil will be commented on for years, as he emerged as a virtual caricature of everything Europeans hate about Americans.

Preternaturally over-confident and under-prepared, arrogant, and self-regarding, the president urged Russia be readmitted to the G7 club (despite its iron-clad control of Crimea and ruination of eastern Ukraine), doubled down on enraging European and Canadian allies alike over the brewing trade war (‘America is not a piggy bank’), and generally confirmed everyone’s worst fears that the White House actually prefers dealing with America’s authoritarian foes, such as China’s Xi Jinping, North Korea’s Kim Jong-un, and Russia’s Vladimir Putin, rather than the vexing, well-meaning, but weak democratic pygmies who populate the standard multilateral meeting. Surely, after such an odious display the rest of the democratic world must rise up in righteous indignation and……

Well, the best I can come up with is snub Trump administration appointments at formal cocktail parties. For the bleak truth lying behind Donald Trump’s appalling, wrong-headed policies and behaviour in Canada is that the rest of the democratic world is pathetically weak and bereft of agency. As such, while they seethe with disgust at having to put up with the odious president, there is nothing practically they are prepared to do to stop him. This most transactional of presidents has inadvertently but graphically illustrated how practically irrelevant America’s western allies, particularly in Europe, truly are.

Be careful what you wish for

This is all so different from the dreams of a new multipolar world that so animated European thinkers during the long days of the bipolar Cold War. Then, European policy intellectuals—particularly in France—dreamed of living in a multipolar age that would follow victory over the Soviet Union in the Cold War, a time when Europe would finally achieve the strategic flexibility to have its own independent foreign and security policy, no longer shackled to (but still vaguely allied with) the US. But this long-term strategic goal amounted to little more than emotional wish-fulfilment, predicated as it was on two unremarked upon suppositions.

The first was that the relative diminution in American global power would be meekly accepted by a US long used to running things. In other words, a series of President Obamas would shepherd the US to accept its new central, but relatively more limited, structural position in the multipolar world. To put it mildly, a President Trump—whose very campaign slogan ‘Make America Great Again’ is an overly emotional refutation of America’s relative decline—was not reckoned on.

Second, it was blithely assumed by European thinkers that their continent would undoubtedly and effortlessly emerge as the principal new force in this new world of many powers. As China rose during the latter days of the Cold War, following Deng Xiaoping’s historic opening in December 1978, European thinkers did foresee a world where a rising Asia would join America, Europe, Japan, and a diminished Russia as the main players on the global strategic scene (India was little thought of). But the notion that Europe would be by a long way the weakest of these great powers—politically divided, economically sclerotic, and militarily puny—never entered their thoughts.

As a result, while European thinkers seemed to pine for a multipolar world, in reality it was a new era where their continent was rising–as America was falling and the Soviets were non-existent–that was their real dream. Donald Trump’s petulant performance (and Europe’s anaemic non-response) at the just concluded G7 meeting glaringly illustrates that today’s world is simply not the sort of multipolarity European thinkers ever had in mind.

What Europe Should Do

 Most foreign policy articles (and I have written over 500 of them) are cries in the wilderness, futile exercises where the analyst proposes outcomes that they know will never come to pass. Nevertheless, it remains the duty of every political risk analyst to try, to posit what can be practically done to retrieve strategic situations, for irretrievable decline is a choice and not a preordained destiny.

In this spirit, what can Europe do to make itself relevant as a Great Power in the real multipolar era we actually now live in? First, psychologically accept that while Trump is an extreme case, American leaders in general are transactional in nature; they will only take European concerns on board if it is viewed as a serious power capable of going its own way in terms of genuine practical policy consequences. Global politics is not a debating society; what matters are the views of the great strategic players, and the power they bring to bear—political, economic, strategic, diplomatic, and social—to further their interests. Europe must stop passively watching the world, and either master history, or history will surely master it.

Second, the Europeans have to act in a far more unitary manner in terms of foreign and security policy. Russia, an economic basket case in comparison (its economy is smaller than that of Italy), is the relevant comparison. For all that it is a corrupt, demographically decaying one-trick economic pony, a decrepit gas station utterly dependent on the spot price of oil and natural gas, Moscow punches far above its actual weight on the global scene.

The reason? President Putin can make decisive, unitary, foreign policy decisions for his country that are quickly acted on. Russia—as the Crimea episode illustrated—is still prepared to spend blood and treasure, to make real sacrifices to further the country’s foreign policy goals and interests. At present, I am not sure many in Brussels would be prepared to sacrifice a week’s holiday to do much of anything. For once and for all, Europe and its leaders have to decide if their foreign policy amounts to merely virtue signalling, or whether they are prepared to make the sacrifices to actually matter in the world.

To do so, an inner core of the key western European states—Germany, France, Italy, Spain, and The Netherlands—must move ahead, and actually begin to craft such a common foreign policy. Failure to do so will inevitably lead the other great powers to cherry pick Europe, to keep dividing the place precisely because it is inherently divided. It is not the fault of the outside powers, as states since time immemorial have taken advantage of their rival’s weaknesses. Rather it is the fault of a Europe that simply can’t get its act together.

Finally, as the mediocre age of Merkel subsides, endemic problems must be solved, rather than merely managed. Across the continent, Europe must free up its animal spirits and find a way to increase average growth rates to around two percent, if horrendous rates of youth unemployment and endemic economic torpor are to be righted. President Macron’s courageous and largely successful labour market reforms are a start, by more needs to be done.

With France as a nucleus, and after decades of torturous (and maddening) inaction, the major European countries must commit themselves to some level of serious defence spending, as without an army their moralistic lectures are just that, and nothing more. Finally, and again Macron is onto something here, ‘A Certain Idea of Europe,’ the idea of a strong, distinct, unique and blessed Europe, a sacred place whose interests and values are worth fighting for on the global stage, must be advanced as a unifying clarion call to action.

It is not too late for Europe to emerge as its thinkers once dreamed it would, and Trump’s odious behaviour in Canada surely serves as a call to arms. But it is one minute to the midnight of Europe’s strategic irrelevance.

Published by Princeton University Press, June 15, 2018.

–Dr. John C. Hulsman is President and Managing Partner of John C. Hulsman Enterprises, a prominent global political-risk consulting firm. His new book, To Dare More Boldly: The Audacious Story of Political Risk, was published by Princeton University Press in April and is available on Amazon. He lives in Milan, Italy.

 

 

 

 

        

 

In a trade War, Europe Can Deal a Historic Blow to the US

By Dr John Hulsman and Dr Boris N.Liedtke

“This is so dumb. Europe, Canada, and Mexico are not China, and you don’t treat allies the same way as opponents.”

–Senator Ben Sasse, Republican from Nebraska, regarding President Trump’s Trade strategy

 The vast majority of economic theorists would agree that in a trade war the economies as a whole in all the countries involved lose out. Their conclusion is, despite sunny and fantastical claims by the Trump White House to the contrary, that a trade war is not winnable. But this should only be where discussion on the administration’s bellicose trade policy towards its allies—the EU, Canada, and Mexico—begins, not ends.

For the key is to think broader than the trade relationship between two countries. The Trump administration, in its gormless overconfidence, has just handed a potential historic victory to its allies in Europe and Canada – as long as these countries are willing to accept the new reality of a Trump presidency, the multipolar world we now live in, and boldly go where they did not dare go before.

Donald Trump’s negotiation style has been highly predictable and consistent throughout his business career as well as since assuming the presidency. It can be summarised by two main pillars which are common knowledge among professional negotiators: first adopt an early anchor strategy, and second know and exploit the counterparty’s BRA (Best Realistic Alternative). The former simply means to be the first in a negotiation to claim a position highly favourable to yourself, thereby forcing the other party to start negotiating away from their core position.

The second negotiating gambit is to analyse what the counterparty’s best realistic alternative is if a deal is not struck. Once this is known, you are then willing to marginally move from the anchor towards inside a settlement area that is better for the counterparty than no deal at all. The only way to counter this strategy is by walking temporarily away from the offered deal, find a better realistic alternative or improve on one’s position. When that is done, the trick is to re-engage with the other party by throwing out your own anchor.

Moving from theory to reality, Trump has just thrown out his anchor in trade negotiations with Canada, Europe and Mexico by unilaterally imposing tariffs on steel and aluminium. The knee jerk reaction of these countries is to counter this with their own punitive tariffs and then seek negotiations hoping to settle somewhere within their best realistic alternative, but probably relatively close to what the Trump administration will be hoping for. Consumers in both countries will face higher prices; jobs on both sides of the Atlantic will be lost and economic theorists will be proven right – no one wins a trade war.

But this unimaginative policy would also mean missing a historic opportunity which the US has just blindly, foolishly, handed to Europe. If the European countries and the EU have the imagination and the will to see President Trump’s unforced error, they can seize on his glaring mistake as a game changer in global politics itself, or at least at a minimum as a substantially improved Best Realistic Alternative in future talks with the US.

In 1823, then Secretary of State John Quincy Adams formulated the Monroe Doctrine, which has been the bedrock of US foreign policy ever since. In essence, it claims that “as a principle in which the rights and interests of the United States are involved, that the American continents, by the free and independent condition which they have assumed and maintain, are henceforth not to be considered as subjects for colonization by any European powers.” America boldly declared that the Western Hemisphere was exclusively an American sphere of influence, and that European (and any other) powers were to be kept out.

Mexico and Canada, as America’s immediate neighbours, have benefitted from the Doctrine through improved national security and trade but have also seen their foreign policy options severely restricted. But the foundation for the continued relevance of the Doctrine have been rapidly corroding during the Tump presidency. The president has called into question both the military commitment it offers its allies and has now moved to challenge the economic benefits of free trade with its closest neighbours, who are amongst its most important trading partners. Institutionally, NATO has been questioned and NAFTA is outright being blown apart. Europe needs to react to these calamities and step out of the shadows of a regional power to assume its role as a global player.

And the time is ripe for the EU to pounce. Undoubtedly, Canada in many ways finds itself a ‘European’ country marooned on the North America continent, in terms of its cultural, political and economic mores. Among foreign policy circles it is frequently joked that Canada would feel more at home if it would be situated between Belgium and the Netherlands, yet geography has errantly placed it north of the United States.

While Canada can’t do much about its geography, President Trump has nevertheless opened the door for a bold strike to shift Canada back to the sphere of influence of Europe – reversing the Monroe doctrine. Instead of playing tit-for-tat on trade with a negotiator like Donald Trump, the European Union could change the game entirely, offering Canada the opportunity to apply for a fast track admission to the European trade block, joining as a full member at the earliest possible opportunity. Lost trade relationships between Canada and the USA would be quickly replaced with access to an even larger consumer market in Europe, and on far more common cultural trading terms. Geo-strategically, Europe, instead of losing global influence through Brexit, would gain a foothold on another continent.

Scepticism about Europe being capable of expanding to the Americas should be put to rest by looking at recent history. During the 1990s and 2000s, the European Union moved eastwards to include former Communist countries, which were and in some cases remain further removed Brussels than are the rule-of-law-loving Canadians.

The audacious invitation to Canada to apply for membership in the European Union—triggered by America’s feckless declaration of a trade war on its own allies–would inevitably trigger an anguished, overdue, and fundamental foreign policy discussion in Washington about what it would mean to have the European Union on its northern border. As NAFTA inevitably breaks up—due to a combination of the Trump administration’s unrealistic demands on Mexico, and its likely July election of leftist firebrand Andreas Manuel Lopez Obrador as president–it is conceivable that America’s southern neighbour might even seek to join this alliance over time. Geo-strategically, the world would be truly turned upside down, heralding the birth of the new multipolar era.

Even at a minimum, such an initiative would have substantially shifted the Best Realistic Alternative trade strategy in any future negotiations with the US. Instead of seeing themselves as vassal states depending on the US for its defence, foreign, and trade policy – Canada, Mexico and Europe–would sit down with the US as negotiating equals, letting Donald Trump know that the alternative to sensible trade positions between the allies of the Cold War is an absolutely ruinous policy of geopolitical isolation, with the US finding itself surrounded by the European Union on its own continent.

Donald Trump is succeeding in singlehandedly taking an axe to the old international order. However, with geopolitical creativity and will, a new and better one can still emerge from the ashes.

–Dr. John C. Hulsman is President and Managing Partner of John C. Hulsman Enterprises, a prominent global political-risk consulting firm. His new book, To Dare More Boldly: The Audacious Story of Political Risk, was published by Princeton University Press in April and is available on Amazon. He lives in Milan, Italy.

–Dr. Boris N. Liedtke is the Distinguished Executive Fellow at INSEAD Emerging Markets Institute and has over twenty years’ experience in the financial sector. He was the CEO of the largest bank by assets in Luxemburg and board member for Operations at the largest German fund manager. He is author of numerous articles on finance and trade as well as having received his PhD from the London School of Economics for the publication of “Embracing a Dictatorship” by MacMillan.

Published in the European Financial Review, June 6, 2018.

 

 

 

 

 

 

 

 

 

The North Korean Summit Hiccup Belies the Greater Problem of the White House’s Failure to ‘Game Out Lunatics’

Legend has it that at the height of the Third Crusade (1189-1192), Count Henry of Champagne spoke at length with the mysterious, charismatic “Old Man of the Mountain,” Rashid ad-Din Sinan. The story goes that the haughty Crusader claimed that he had the most powerful army in the Middle East, one that could at any moment defeat the Hashashin, the Old Man’s threadbare cohort of followers. Count Henry went on, pointing out that his force was at least ten times larger than that of Sinan’s.

Unimpressed, the Old Man calmly replied that the count was mistaken, and that it was his unremarkable-looking rabble which constituted the greatest army in the field. To prove his point, he beckoned one of his men over to him and casually told him to jump off the top of the Masyaf mountaintop fortress in which they were holed up. Without hesitating, the man did so.

Through the many centuries that separate us from Count Henry, the myriad twists and turns of Western politics, culture, and life that come between us, there is absolutely no doubt at all that westerners today would share his horrified reaction to what the Old Man of the Mountain had demonstrated to him.

“This guy is totally nuts.”

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This telling historical vignette was eerily re-enacted last week, in Donald Trump’s ‘break-up’ letter to Kim Jong-un, the far-out leader of seemingly indecipherable North Korea. Playing the part of Count Henry, the President not so subtlety hinted that America, as the greatest military force in the world, could wipe North Korea off the map at any moment it chose. Like Count Henry, Trump was making it clear to his rival that in essence their contest was so strategically lopsided that meek surrender—in this case with the policy end game of unilateral North Korean nuclear disarmament as the only possible outcome—really was the only possible option.

But as was true for Count Henry, that assumes your enemy is playing by the same rules that you are, and makes the same calculations. If, to our horror, we found that they do not, it is far too easy to simply say our enemies are ‘crazy,’ meaning their motives simply cannot be fathomed, letting us off the hook far too easily.

Throughout history, both decision-makers as well as geopolitical analysts have always had a very hard time getting past the wholly understandable first reaction that those with very different belief systems from ours are simply unknowable. In the Old Man in the Mountain’s case, given his effective strategy for engaging in strategic assassinations, westerners took to calling his followers Hashashin, or “users of hashish,” as drugs became the only possible (and incorrect) rationale the Crusaders could come up with to explain their intensity, morale, and absolute personal commitment to Sinan, rather than to the western value of the sanctity of human life. It has always been all too easy for decision-makers to write off ‘lunatics,’ lazily saying to themselves that the different and the strange simply cannot be understood.

There has been a lot of this misdiagnosis going on regarding Kim Jong-un’s totalitarian hermit kingdom; former National Security Adviser H.R. McMaster forthrightly said Kim Jong-un was ‘crazy,’ and is therefore unable to be deterred by the threat of a nuclear counter-strike, meaning that the nuclear deterrence which has kept the global peace for these past seventy-plus years does not apply to North Korea’s nuclear programme. But have Kim’s actions really proved so unknowable, just because North Korea’s politics and culture are so admittedly different from our own?

Far from it. While there is no doubt Kim Jong-un would serve as an excellent Bond villain—between very publicly poisoning his half-brother Kim Jong-nam with sarin and executing his pro-Chinese uncle and former mentor Jang Song-thaek by blowing him to pieces with artillery—there is surely method to his madness.

While the North Korean dictator is certainly odious, he seems to have a very well-defined and rational sense of self-preservation; in fact, he killed his uncle and his brother precisely because he feared they might emerge as threats to his continued rule and also to his life. In not allowing any alternate sources of leadership to emerge within the famously closed-off North Korean regime, Kim is clearly enhancing his chances of survival in the political shark tank he calls home.

Nor is Kim’s single-minded pursuit of an advanced nuclear weapons program capable of striking the US lunacy; rather the dictator has read some recent history, as the recent spat over the Libya model—a point which led to the temporary postponement of the summit—makes eminently clear. A North Korea in possession of such weapons has a ‘get out of jail free’ card, being able to ward off the oft-stated US desire for regime change in Pyongyang. Kim would be able to definitively avoid the recent fate of Libya’s Muammar Gaddafi and Iraq’s Saddam Hussein, who relinquished his nuclear programs, only to be overthrown and brutally killed.

For National Security Adviser John Bolton and Vice President Mike Pence to bring this up, illustrates that it is they and not the ruthless North Korean dictator who are living in an illogical fantasy world. For the Libya model, given the horrendous outcome for Libyan dictator Gaddafi, would obviously seem to be the last framework of choice for Kim Jong-un to embrace, given his rational desire for survival. As ever, American hawks overrate the objective global power position of the United States, as we live in a world where America, for all that it remains the most powerful nation on earth, is simply no longer the only game in town.

By understanding neither the basic structure of the world we live in—that it is comprised of many powers—nor that Kim Jong-un might be put out by the Gaddafi comparison, senior figures in the Trump White House seem to have forgotten that any negotiation short of unconditional surrender usually involves give and take by both sides, in this case over the terms, time frame, and pace of North Korea disarmament, as well as over the security guarantees that are necessary for a surprisingly rational Kim to be given, in securing both his position and his life.

The Old Man of the Mountain must never be forgotten by modern-day decision-makers, as in the end his seemingly unfathomable against-the-odds strategy was crowned with an improbable victory in the Third Crusade. His successful career underlines the vital need to game out ‘lunatics’ such as Kim Jong-un. For not only is there almost always method to their madness. Sometimes they actually win.

Published by Princeton University Press, May 30, 2018.

–Dr. John C. Hulsman is President and Managing Partner of John C. Hulsman Enterprises, a prominent global political-risk consulting firm. His new book, To Dare More Boldly: The Audacious Story of Political Risk, was published by Princeton University Press in April and is available on Amazon. He lives in Milan, Italy.