Cause and Effect in European Politics and Law

French onion soup in Washington

Adelina Marini, April 2, 2010

In foreign policy there are no things that happen by accident. When something is happening but the context is not clear, this only means that it is not clear to everyone. Usually, with the time, the reasons for what's happening become known and then we get the familiar feeling that "the jigsaw puzzle is arranged". Similar was the feeling from the surprising visit of the French president Nicolas Sarkozy in Washington this week. Unfortunately, it is too early to say whether the puzzle is arranged or not.

What happened with the high level French visit actually has several layers. In fact, it looks very much like an average piece of onion - enough layers but, in the same time, not that hot as a taste.

The first and most obvious layer is another Transatlantic trade dispute. This is the conflict between Boeing and Airbus over American Department of Defence procurements, which seemed to exclude the participation of external companies (European). This, according to the Europeans, is a form of protectionism, which is not good for anyone. The American Department of Defence announced in the beginning of March that it wanted to change its old air tankers fleet with new for the price of $35 mn. According to Airbus, the Department demonstrated it preferred the American company Boeing, and this is part of a longstanding trade dispute between the US and the EU.

At their joint press conference at the White House before their official dinner on Tuesday evening, president Barack Obama explained that the decisions for procurements depended on the Defence Secretary and the president could not interfere. He assured however, that Secretary Robert Gates was in a battle for quite some time to reform the extremely conservative mentality in this regard, and expressed hope that soon the procurement rules would be changed. "That's in our interests. It's in the interest of the American taxpayers", Mr Obama added.

The second layer in Nicolas Sarkozy's visit to the US is the reform in the international financial system. This is a problem which initially seemed common but almost a year later it looks as if the Transatlantic partners have again taken their own paths. When the financial crisis exploded, the G20 leaders agreed together to reform the financial system toward increasing global regulation. With the first indications of exiting the recession, however, the actions of the governments around the world showed that because of the fading risk, they could postpone or soften tighter measures.

From the very beginning the French president has been the staunchest supporter of tight global regulation, in order to avoid similar shocks in the future. Nicolas Sarkozy's problem though, was not only the G20 leaders but also many EU member states, especially Britain and Luxembourg which feared that tighter regulation could kill the business of their financial cities.

The European Union hardly managed to achieve some form of a pan-European supervision and regulation. The biggest problem appeared after the US, although it was lagging behind Europe last year, pushed for a bill for financial regulation, which Washington shared with no one. The bill envisages the creation of a special body to protect the rights of the consumers of banking services, as well as a structure for banking supervision, outside the Fed. Such measures could work probably well on national level but in a globalised world, such decisions should not be taken unilaterally, the EU says.

Financial regulation will be a subject of serious discussions at the G20 summit in Toronto in the summer. It is with this layer that France proved to be the author of diplomacy. In an informal speech (according to Sarkozy, the speech was not written and came "from the heart") at the Columbia university in New York, a day before his meeting with Barack Obama at the White House, Nicolas Sarkozy announced: "If Europe and the US do not redesign this new model then no one else will do it. That is something you really have to understand. Alone Europe will not be able to impose its ideas. Standing alone the US will not be able so either. But if we together do not come up with new fresh ideas then no one else will do it instead of us. And that is the reason why I am here, that I have come to the States".

Sarkozy was sharp but in the same time a realist. He admitted that the US were the largest world power and this was why if they succeeded in doing something at home, the whole world would benefit. But if they failed, they would fail everyone else.

The French leader interfered diplomatically in a very sensitive for America issue: "The dollar is no longer the world's single currency. It is a very important currency but it is not the only currency. The yuan, the Chinese currency is an important currency. Part of your savings is in Chinese hands. So we have to come up, we have to design a new international monetary order and decide together on how to handle and manage interest rates and to regulate currency fluctuations".

This statement was directed both to Washington and Beijing, blamed by almost the entire world of subsidizing its currency in order to maintain its value which is good for the economic growth but is distorting international markets. For now China is determined that it will not change its policy.

At the White House press conference, the American president started his expose with the financial reform. After the obligatory thanks and courtesies, when he reported that France was America's oldest ally and that thanks to Nicolas Sarkozy the French republic was again a leader in Europe, Barack Obama made it perfectly clear that maybe it was not a good idea for the US not to share with its partners what it did, but that he would do nothing more than just share.

"We agreed to continue working aggressively to sustain the global economic recovery and create jobs for our people. And this includes, as we agreed with our G20 partners at Pittsburgh to replacing the old site bubble and bust with growth that is balanced and sustained. And This requires effective coordination by all nations. To that end I updated the president (Nicolas Sarkozy) on our efforts to pass a financial reform". Mr Obama added that indeed supervision was necessary to put an end to reckless speculation and reckless risk-taking by few big players on the back of taxpayers and harming the entire global economy.

Nicolas Sarkozy seemed much more constrained than at the univesity, because first he talked about the French friendship with the US, about the French and EU's contribution in Afghanistan, about Iran and the Middle East and only then he reached the issue for which he went to the US in the first place - financial regulation. According to him, it was a good news for the whole world that the US would avail to rules, accepting rules which would prevent the world from returning to where it was hardly exiting. France will take the one-year presidency of the G20 and the G8 from next year and said it would invest a lot of efforts to regulate the world capitalism. "And in particular raising the issue of a new world international monetary order".

An American journalist asked a question whether America was open enough and discussed important global issues with its European partners. This, in fact, is another layer in Transatlantic relations, which in the past several months, emerged in the agenda after Barack Obama refused to attend the regular EU-US summit in Europe. The explanation of his administration was that the US was still not aware whom in the EU to turn to.

No matter that the question was addressed to the French leader, Barack Obama decided to respond first, choosing humour as a carrier of the message: "I listen to Nicolas all the time. I can't stop listening to him".

In return, the French head of state said something very important - that he was speaking on behalf of chancellor Merkel, of Gordon Brown and other EU leaders. Further he explained, that he was always amused by the comments in the press that the US was ignoring Europe. The most important thing Sarkozy mentioned in this context was the following: "... president Obama when he says something, keeps his word. His word is his bond. And that is so important. From that point of view there are no surprises. When he can he delivers, when he can't he says so. And we try to be likewise".

After the words, veiled in many layers and delicious as a French onion soup, actions should surface because only actions can show who meant exactly what. The first test will probably be in Toronto in June, when the G20 leaders will gather for a summit.