One of the biggest questions in today’s European politics is what price Germany is willing to pay to keep the UK in the EU. One school of thought – which strangely sees an over-representation of retired Europhiles and hardcore Eurosceptics – claims virtually no price at all. Berlin will choose Paris – and Warsaw – any day of the week. David Cameron might as well throw in the towel now.
Well, the past week may have given Berlin a taste of what an EU without Britain could look like. And it ain’t pretty.
The looming EU-China trade war has again pitted Europe’s north against its south, with Beijing pursuing its patented ‘divide and conquer’ strategy. The dispute was triggered by Brussels’ decision to impose anti-dumping tariffs on heavily subsidised solar panels from China. Beijing’s retaliation was swift: you Europeans spend an awful lot of cash subsidising wine. Is that really legal under World Trade Organisation rules?
It hasn’t been lost on anyone that the biggest wine producers in Europe also are the strongest proponents of the solar panel tariffs: France, Italy and Spain. Given the symbolic importance of wine in these countries, this is no longer only business: it’s personal.
A trade war with China would hurt everyone but, wine exports notwithstanding, it would be particularly bad for Germany. With demand in the eurozone drying up, the boost in German exports is largely due to a rise in its share of the Chinese market. A disruption in these export flows now, when the European recovery is balancing on a knife’s edge, would be a disaster for Germany.
It’s therefore not surprising that Berlin has gone to town over the anti-dumping tariffs, and it has been backed by the UK and other liberal countries.
However, since the EU has so-called “exclusive” competence in trade policy, the European Commission negotiates on behalf of all EU member states and Germany is hostage to majority decisions amongst EU ministers.
The way EU trade policy is decided is complex. A final decision on whether to keep the tariffs in place will be taken at some point towards the end of the year, though it could well be solved before then. But clearly, without the additional pressure and weight of the UK, Germany would struggle to get its way on this one. Any short-team decision to remove the tariffs requires a so-called Qualified Majority. Germany would find it extremely difficult to reach the necessary voting share absent the UK (and may even struggle with it, though the final decision is taken by a simple majority).
And this is where Brexit meets the German economy. At the moment, under a Qualified Majority Vote the Northern, liberal bloc has a “blocking minority” in the EU’s Council of Ministers, which means it can stop the many attempted protectionist measures originating in the Mediterranean. The southern group, too, has a blocking minority – meaning the two blocs balance each other. However, should the UK leave, the Mediterranean block would substantially strengthen its collective voting weight, whilst the German-led North would lose its blocking minority altogether. The field would be wide open for a barrage of anti-dumping tariffs and tit-for-tat trade wars (think “Buy European”) with China and other crucial destinations for German products.
There are several other reasons why Berlin fears a UK exit more than it lets on – prospect of paying even more to the EU, extra costs to UK-bound exports, losing a financial gateway to global markets, geopolitics and more. But as Germany increasingly goes global, it’s the fear that a more protectionist EU could prevent it from doing business across the world which really hits home.