Here we go again: The U.S president is attacked on a global scale for his thinking on trade and investments. Mrs. Merkel, chancellor of Germany even announced a “new chapter in U.S. European relations” and stated that “Europe must take our fate into our own hands’’. Similar accusations had been raised in 1980 after the election of President Reagan. He was labelled a B class actor, a cowboy and an inexperienced but lucky vote gainer. The accusers were wrong then and they are wrong now!
President Trump lived up to his convictions during the tense G-7 political summit just as he had already done during and after the U.S. presidential campaign. No surprises there when he reflected on the need for more balanced trade relations and the requirement for all nations to pay a fair contribution for the benefits they obtained from the United States.
U.S. support to the European countries harks back 1947 to New Hampshire. The Bretton Woods negotiations were guided by generosity, kindness and by the threat of Soviet expansion. The U.S. created rules for trade in the General Agreement on Tariffs and Trade (GATT). Also emerged new support of currencies with the International Monetary Fund (IMF). A new approach to alleviate poverty and support reconstruction came from the World Bank. What generosity of spirit after years of mortal conflict!
Excellent those measures were – but the context in which they were applied has changed. What was instrumental 70 years ago and designed to help rebuild from destruction no longer holds true since decades. U.S. global rules consisted of giving other countries and firms constantly a little nudge to do better. At the same time U.S. international economic needs were ignored, since North American firms were expected to take care of themselves.
At any given year, this approach was acceptable and demonstrated that in the U.S. it’s not just profit that matters, but that we have a soul. Yet even if such support for allies abroad was only half of one percent per year, after 7 decades the numbers add up. Just check with the British economy and see its former world currency, the pound. Small but consistent degradations over time have wreaked havoc with its former pride of leadership.
President Trump reflected U.S. leadership when raising the need for greater circumspection in trade, investment and defense. No longer should there be continuous special flows of funds and privileges from the U.S. to Europe. Times have changed and Europe can stand on its own. But Europeans won’t do it by themselves. Changes could have come based on the gigantic peace dividend which came onto Europe after 1985. But instead of investing the newfound funds into private expenditures, new R&D and greater global participation, the dividend was squandered inefficiently. Now there are substantial trade imbalances, insufficient budgets for necessities, and high deprivations of personal incomes. It makes sense to aim for a balanced and future oriented relationship both within Europe itself and between Europe and the U.S.
President Trump has given Europe a necessary nudge which may help nations to get on the right track and to garner speed of progress. In past times such activity was labelled as that of a ‘patron’. Those who helped rectify shortfalls were called ‘friends’. Today change is held up by European leaders and media as example of imprudence since it will require change. Of course it will and that is good and long overdue. Relationships that are rigidly frozen in place cannot last. Dynamism and mutual adjustment are the fuel of progress. It is time for new bonds and new trust bridges. Europe, you are welcome !
Professor Michael Czinkota (firstname.lastname@example.org) teaches international marketing at Georgetown University’s McDonough School of Business in Washington D.C. and the University of Kent at Canterbury, U.K. His key book (with Ilkka Ronkainen) is International Marketing, 10th ed., CENGAGE