CIAO DATE: 02/02

The United States and Europe: Smooth Sailing or Storm Clouds Ahead?

William I. Hitchcock
Visiting Professor of History at Wellesley College

Joint Workshop on Europe and Transatlantic Security: Issues and Perspectives
Kandersteg, Switzerland
August 25-27 2000

The Geneva Centre for Security Policy

Two years ago, when many of us gathered together in the dramatic Alpine setting of Leukerbad to consider the recent past and the likely future of US-European relations, our group was full of dire prognostications. Russia was headed toward collapse, the EU looked weak after the Yugoslav war, NATO expansion appeared to be dividing Europe; the introduction of the euro looked liked a risky gamble that might worsen trans-Atlantic relations; and most disturbing for me as an American, my government was preoccupied with the Lewinsky scandal and the future of the Clinton presidency seemed at risk. Indeed, one of our colleagues, discussing the crisis over after-dinner drinks, declared that Clinton would resign from the presidency within matter of weeks.

So much for predictions. In fact, Europe has had an excellent two years (unless you happen to live in Kosovo); Russia appears strengthened; the EU is once again discussing a new defense identity and taking a major role in the Balkans (though the Kosovo war highlighted the enduring hegemony of the United States in Europe; the introduction of the euro has not destabilized the transatlantic relationship; economic conditions in the euro area are robust; and Bill Clinton is still very much in office. Perhaps historians should stick to analysis of the past.

In any case, I probably should. For in preparation for today's meeting, I reviewed the paper that I gave to this group two years ago, and found that I was far more gloomy about the prospects for Europe and its relations with the USA than the facts may have warranted. Although I lauded the new dynamic leadership which had come into power in the mid-1990s, under new leaders like Blair, Jospin, Schroeder, and Prodi, reviewed the positive economic developments that had begun to take hold in the mid-1998 period, and noted a renewed US commitment to European security in the wake of the Bosnia crisis, I also had grave misgivings about three major developments on the European scene: the impact of the euro on US-European relations; the possible adverse effect of NATO expansion on Russia's relations with the West; and fears that Russia could pull itself out of its nose dive without resorting to a strong man in power.

Well, I think it is only fair that I offer a modest mea culpa for some of my more dire predictions. On one major issue, the introduction of the euro, I was wrong. The introduction of the euro, I suggested, might lead to the creation of a rival world currency to the dollar, and so divide the world's finances into two competing blocs. Of course, these are early days, but so far it seems that I overestimated the euro. As we all know, the euro since its introduction in January 1999 has weakened considerably, losing about a quarter of its value against the dollar. What makes this especially odd is that the euro's fall is not due to any underlying weakness in the euro-area economy; on the contrary, as I expected, the euro-11 have been doing very well lately. The area's budgetary position is almost in balance; the area is running a $42 billion trade surplus; unemployment has been declining for three years; inflation is low, which is remarkable given the recent oil shock; privatizations are increasing and European goods are more competitive now than ever; merger mania has hit Europe, as European firms are engaging in competition with American firms for global trade; and the area's GDP growth rate stands at about 3.7%. The major economies inside Europe, especially Germany, France, and Italy, have all been humming along, with GDP growing at between 3% and 4%. A recent IMF report stated that "the conditions for a sustained recovery have not been as auspicious in a long time and leave scope to realize the hopes expressed at the Lisbon summit for the EU becoming a high-performing economy."

Two years ago, we could see these positive economic trends underway, and they have continued. What we could not see, and what few could have predicted, was that positive economic news would fail to translate into a strong euro, and instead we should be faced with a serious loss of confidence in the euro. Explanations for this vary: the continuing US boom has made it easy for investors to stay in dollars and stay out of euros; there is a lingering mistrust of the ability of the Euro-11 states to undertake the structural reform in employment laws to maintain its own boom; and indeed, the EU itself remains a major experiment in international politics. Risk-averse investors are unsure if they want to bet on the long-term viability of a supranational institution which has a poor reputation for executive decision-making and whose membership will be changing considerably in the coming five years or so. So, clearly, the advent of the euro has not been a major issue in US-European relations.

The second issue which concerned me in mid-1998 was the rapid push by the US and its NATO partners to extend NATO to include the Czech Republic, Poland, and Hungary. Here, I think that my concerns, though not unwarranted, were over-stated. I suggested that NATO expansion was likely to worsen relations with Russia, and also serve to divide Europe between the unruly and unstable Southeast and the quiescent central and western states of the continent. It seems to me that NATO expansion has so far been a non-factor. It has not worsened relations with Russia markedly; and the Americans have wisely kept quiet about any new offers of membership to the Baltic states or Romania and Bulgaria. At the same time, it is important to note that our new-found NATO allies were of absolutely no use in the Kosovo air campaign, and indeed, the Hungarians, after begging to be let into the alliance, insisted that NATO troops could not use Hungarian soil for offensive operations against Serbia. So it seems to me that the consequences of NATO expansion have not really been felt yet, whether positive or negative. It may be that worsening Polish-Russian relations, which are already pretty icy at the moment, may present the expanded alliance with a serious future problem; but at the moment, all is quiet on the Eastern Front.

The third issue that concerned all of us in mid-1998 was the future of Russia. The internal political situation then was so deeply troubling, and the economy in that very month took a huge hit when the ruble collapsed. Yeltsin seemed totally incapable of restoring order or confidence in the country. The first Chechen War of 1994-96 only darkened an already gloomy picture. My concern then was that the general Western unwillingness to grapple with the Russian collapse left open the likelihood of an unfavorable political shift in Russia, as calls for a strong-man in power grew and as what might be called the "social-imperial" factor - that is, the search for foreign wars to bolster national unity at home - grew in importance. Here, I do not think I was so far off the mark. President Putin remains an unknown quantity. While there are some things to applaud about his tenure in office so far, there are alarming signs of a return in Russia to a centralized state authority in which basic liberties are at risk. His handling of the second Chechen War, on which he based his bid for power in the first place, has brought out the worst of Russia's problems: the on-going war has laid bare the continuing military weakness of the regime; it has led to increased brutality in the region, as the Russians, like the Serbs before them, seek to solve the crisis by forcing hundreds of thousands of Chechens out of their homeland; and the war has failed to produce any movement toward a political solution, suggesting that the war will go on for a long time.

But Chechnya, grim though it is, doesn't concern the West a great deal. More alarming, and harder to ignore, is the nature of the regime Putin is building in Russia itself. Above all, the crackdown on civil liberties and on the freedom of the press belies the notion that Putin is a reformer. The harassment this past June of Vladimir Gusinsky, the owner of Media-Most, Russia's last independent media outlet, and not coincidentally the leader of the Russian Jewish Congress, is only a visible example of what all the reports from Russia tell us: the civil society which is the hallmark of a liberal democracy is being squeezed, and the press, interest groups, human rights advocates, environmentalists, minorities, and so on are on the run. Putin is a man of the old school, in which he thrived, and obviously his chief aim is to reestablish state authority, which in his view is the key to Russian stability.

Of course, this may not be such a bad thing. If he can tame the oligarchs in Russia, impose an orderly economic policy on the country, and then harness Russia's natural resources, mobilize its low-wage labor force, and restart its idle industrial capacity, Russian economic fortunes could improve significantly, and ease the way toward a better relationship with Europe. Already, he has pushed a new tax law through the parliament and curtailed the power of the regional governors. Meanwhile, the economy has been buoyed by high oil prices. Europeans have been delighted by Putin, for in addition to speaking German, Putin has joined forces with leading EU states to denounce the US scheme to build a new anti-missile shield, thereby upsetting the 1972 ABM Treaty. Thus, the prospects for a stronger European-Russian relationship would seem good. But he must be careful, for if he persists in his murderous, hard-fisted war in Chechnya, and in curtailing basic freedoms which Europeans and Americans value, then he may alienate foreign investment, worsen relations with his central European neighbors, and encourage suspicion and mistrust. After all, Russia still has $150 billion foreign debt, 60% of which is with Germany. Thus, the domestic political affairs of Russia will affect the broader economic and even security relationships in Europe.

Clearly, my overall projections of the major issues in US-European relations were somewhat overdrawn, and it is with great humility that I set out here on another attempt to offer a tour d'horizon of the major issues at stake. The current state of US-European relations is far better than I would have expected two years ago. But I do not think that the future is simply going to be a bed of roses. There are a number of major issues on which US-European views diverge, sometimes sharply; and the way in which these issues are debated and settled will dictate the state of trans-Atlantic relations for the next decade or so. These are issues on which many of you are far more knowledgeable than I, and to which we will all return over the course of today and tomorrow. So, I am outlining here what I think may serve as a kind of rough agenda for our discussions, rather than any idées fixes on specific issues.

The three issues that I would like to raise, each quite briefly, are:

• The continued economic rivalry;

• The problem of the Balkans, and its place in US-European relations; and

• The debate over the US proposal for a national missile defense.

The first issue is the on-going trade rivalry between the EU and the United States. Historians usually don't deal with economic issues very well, and it seems to me that contemporary analysts of security issues don't either. But the European-American trade rivalry has great significance for setting the tone of Atlantic relations for a long time to come. I don't think it threatens the alliance, but I do think that continued wrangling over trade issues tends to create animosity that can bleed over into the overall strategic relationship. Certainly it echoes in the arena of popular culture, if we are to take M. José Bové and his McDonald-bashing friends as any indication.

The issues are well-known to this audience. There is of course the banana dispute, which started in 1993, when the EU adopted a quota system designed to protect the export markets of a number of its former colonies in Africa, the Caribbean, and the Pacific. The US complained, not because it grows bananas - it doesn't - but because various US-based multinationals grow bananas in Latin America. The WTO ruled in America's favor, the EU resisted, and the US has imposed pretty stiff tariffs on a rolling list of EU luxury goods. Then there is the beef issue, in which the US wants the EU to open its market to hormone-treated beef; the WTO again ruled in favor of the US, but the EU has resisted, and obviously public opinion in Europe is behind Brussels on this one (though, given the problems in England and France with mad-cow disease, Europe can hardly claim to have a safe beef supply). The EU also refuses to accept imports of genetically altered cereal products, which it claims is the case with US grains, despite denials from the US. The EU will not budge on this one either. And there are other issues: the EU is continuing its efforts to control imports of American film, video, and audio products, and is also trying to shut the US out of the newly-opened Eastern European market. This is reminiscent of the closing round of the GATT talks, when the French insisted on continuing restrictions against American entertainment products. The French have taken this position since at least 1946, when they were obliged to open up their formerly closed film market in return for a US loan; the fight continues.

Should we care about these on-going debates? I think that while they are not alarming, they do reveal that the EU and US are not simply the happy "band of brothers" NATO rhetoric might suggest. Rather, there are major areas of conflict which ultimately focus on the way Americans and Europeans view economic and social priorities: the EU wants to protect public health; it wants to keep US multinationals from closing out Third World producers with links to Europe; and it wants to act on behalf of European business to prepare European companies to compete on a global scale with the US. Thus, I come back to the issue I raised when discussing the euro: the fact is, we are seeing the development of two global trading blocs, and these blocs are in keen competition with each other, and institutions like the WTO are not proving effective at resolving these conflicts which are rooted in culture and politics as much as in economics. In boom times, such as Europe and America are now enjoying, these issues may not seem terribly important. But should the economies of the West suffer a slowdown, and inevitably they will, these economic issues may become far more serious.

The second issue that I would like to highlight is the continuing problem of the Balkans. It is interesting to note how quickly the Balkans have dropped out of sight in American political rhetoric: neither of the two major US political parties made any reference to the Kosovo war at their national conventions this month, though it was NATO's only full-fledged military engagement in 50 years. It seems that Americans anyway are eager to forget this particular episode; I would like to hear from our European colleagues how closely the Kosovo war and the after-effects are being followed here. But wishing that the problem would go away will accomplish little, and just a brief glance at the region will remind us that the Balkans are going to be a continuing problem for the institutions of the western alliance. Consider three issues:

Kosovo is still a disaster area. One year after the US-led war there on behalf of human rights - which I supported wholeheartedly - the province is still in shambles. There are 40,000 international troops serving there, drawn from 34 different nations, but they can do little to repair a civil society that was so shattered by the war. Virtually all the Serbs inhabitants have fled the province, though SFOR tries manfully to give protection to the few that remain: they would surely be killed without such protection. SFOR, in the interest of preserving some semblance of ethnic diversity in the province, has partitioned off small Serb enclaves which they duly defend from Albanian depredations; in return they earn only the contempt and derision of the Serbs, who see NATO as the root of all this trouble to begin with. The province has no working government; the UN mission is under-staffed, without adequate resources, and hopelessly overmatched by the problems at hand; the local political scene is hopelessly divided between rival Kosovar parties and strong-men; and corruption and violent crime are rife. These are hard images to square with the lofty rhetoric from NATO headquarters about the mission of bringing peace and stability and human rights to the Balkans.

More important, the division of labor here is disquieting. On the one hand, the international effort to rebuild civilian institutions in Kosovo (comprised of at least four major components - the UNMIK, UNHCR, OSCE, and the EU) - is sending money and personnel, while the Americans are generally staying out, feeling that they did their bit in the air war. Thus, a situation is being set up whereby the EU and UN are wrestling with an impossible problem they cannot resolve, while the US sits on the sidelines, waiting for everything to blow up again, only to be called in to launch a few more cruise missiles on Belgrade. It is not a recipe for enduring success. If America is going to be Europe's sole superpower, then it ought to accept responsibility not just for defense issues but for peace-building as well. Of course, this assumes any outside power can in fact "build peace" in Kosovo - a project that, despite the EU's efforts, has so far failed.

Of course, NATO and the EU are not to blame for Kosovo's fate; Slobodan Milosevic is. And yet he remains in power. Indeed, though his country has been wrecked by eight years of almost constant warfare, his own power has been strengthened. This past July, Milosevic forced through the Yugoslav legislature a series of constitutional changes which should alarm western observers. First, he made it possible for himself to run again for at least two more four-year terms as president. So we'll be seeing a lot more of Slobo. Further, the changes weakened the federal nature of the rump Yugoslavia, in which Montenegro, the last remaining partner with Serbia in the Yugoslav federation, used to have a say in who would serve as federal president. Thus, one of the last vestiges of Tito's constitution that attempted to balance power between the republics has been smashed.

That brings me to the third point: some reports suggest that part of Slobo's intention is to antagonize Montenegro, thereby triggering an open declaration of independence by that republic, and so lead to another war with Serbia in which NATO and the West will be forced to choose between acquiescence in a power move by Milosevic, or to intervene yet again in the Balkans at a time when Balkan-fatigue is running pretty high in western capitals. It is a bitter irony that the only way for the West to avoid such a scenario is to send the word to President Milo Djukanovic that he had better not make any moves that could antagonize Belgrade. So now the West, after a decade of trying to break Milosevic, finds itself acting as his surrogate in enforcing obedience to Milosevic's constitutional chicanery. The general scene, then, is not encouraging: a stronger Milosevic, a weaker Montenegro, and chaos in Kosovo. Can anyone doubt that the West will soon be involved in yet another chapter of Balkan violence before long?

Alongside trade issues and the Balkans, the EU and US will continue to face continued tensions over defense issues. I do not think the debate is terribly urgent, but the divisions are nonetheless real. First, the EU at the Lisbon Summit once again launched the idea for the formation of a "European security and defense identity," which in theory would allow European states to engage in regional conflicts more effectively without the need to appeal to the United States. The Kosovo war was humiliating in this respect, as the entire military burden of that conflict was borne by the United States. I suspect that most of this talk is pretty vapid: the EU has been planning for a common foreign and defense policy for a long time, and little has come of it. France, in particular, would like to see a more robust European defense capability, precisely to de-emphasize the dependence of Europe on the US in military affairs, and has urged the creation of a 60,000-troop EU-controlled rapid reaction force. Yet NATO remains the sole arena in which military issues are decided, and few NATO members wish to transfer that authority to the EU. That means the US remains in command of the agenda. As long as the US wants to be the hegemonic power in Europe, and frankly I hope it does for a long time to come, the EU proposals will do little to weaken the US-European linkage.

Far more threatening to the NATO-EU linkage is the proposed missile defense system that the United States wishes to build. The idea behind this, so far as there is any coherence to it at all, is that in an era of nuclear proliferation, various "rogue" states may soon possess sufficient missile capabilities as to be able to strike the United States with a nuclear weapon. While it is unlikely that a rogue state would strike at the US simply for kicks, the advent of such missile capability, so the argument runs, might deter the US from coming to the aid of an ally for fear of nuclear retaliation. The argument is probably driven by the situation on the Korean peninsula. So the US needs a missile shield in order to maintain its freedom of action in the military and diplomatic sphere.

But there are a number of major problems with the proposal. First, of course, it is unlikely that the technology will work. Early trials have been laughable. Second, the cost is simply stratospheric: $50 billion at last count. Third, a national missile defense is in direct contravention of the 1972 ABM treaty between Russia and the USA. Not only will a missile defense system hurt US-Russian relations, but the precedent here is truly worrisome. For fifty years, the cold war rivalry was contained and framed by a mutual understanding about the stabilizing effect of deterrence. Deterrence worked. The United States seems to think that deterrence doesn't work anymore - presumably because "rogue" states are irrational - and therefore the only solution is to hunker down behind a missile shield. But the problems of ABM systems are no different now than they were in 1972. A shield of this sort upsets traditional great powers like Russia and China because it renders their missile systems obsolete and works to undermine the basic implicit stability within the nuclear club. It is a declaration of independence from the carefully balanced, quite interdependent, nuclear equilibrium the world now finds itself in. It would trigger an "every man for himself" attitude among the nuclear powers, and spur a new round of missile competition, especially from China and probably Iran. Rather than offer stability, the shield would dangerously upset the nuclear balance. And finally, for our purposes, the shield sends a very unsettling message to our NATO allies. The Europeans quite rightly have criticized the shield for the same reason that they wanted an ABM treaty in the early 1970s: a shield over the US would leave them out, making them the likely target of a rogue state attack. Thus, the American proposal has succeeded in pushing the EU and the Russians together in opposing the shield - a rare accomplishment indeed.

It seems to me that the American proposal is the unfortunate result of unipolarity. After a decade of running the world, the US has started to believe it can impose its will on its allies and its rivals alike. The shield is in my view just one manifestation of a strain in American politics today, most prominent in Republican party circles. It is an expression of that post-cold war triumphalism that has lain dormant since the presidency of George Bush in 1991, when the US boldly spoke of a new world order, but then failed to capitalize on its opportunities to build one, preferring instead to enjoy its unprecedented supremacy in world affairs and deal with foreign policy on a case by case basis. Today, that strain of thought - that the US is the sole superpower and so doesn't really need allies - is resurfacing again. Of course, it is an election year, and perhaps a bit of old-fashioned flag-waving is to be expected. But Governor Bush has promised to push ahead with the missile shield, showing that he too has little sense of how alliances work to stabilize the world. A missile shield is a bold statement that America comes first and the devil take the hindmost. It is a regrettable sentiment and yet I am afraid it is all too likely to dominate the tone of US-EU relations in the coming eight years - during the Bush presidency.

To conclude: my view two years ago of a series of crises on the horizon was perhaps too sharply drawn. The boom times the West now enjoys have aided in papering over these rivalries, and the Putin presidency has delighted the major western governments, whatever his record on civil rights. But these are good times, and when the chips are down - and they always do go down - the US and EU will find themselves once again engaged in sharp debates over trade, over policy in the Balkans, and over defense issues.